GCE O/L Business & Accounting Studies flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Opportunity cost

The value of the next best alternative given up when a choice is made. It arises because resources are scarce and cannot satisfy every want at once.

Added value

The difference between the selling price of a product and the total cost of the inputs and processes used to produce it. Higher added value supports higher wages and profit.

Tertiary sector

The part of the economy that provides services rather than goods, such as retailing, banking, transport, education and tourism. It employs most workers in developed economies.

Stakeholder

Any individual or group affected by or interested in a business, including owners, employees, customers, suppliers, lenders, government and the local community. Each has different expectations.

Entrepreneur

A person who identifies a business opportunity, organises the required resources and accepts the financial risk of success or failure, usually in return for profit.

SWOT analysis

A structured review of a business idea covering internal Strengths and Weaknesses and external Opportunities and Threats. It helps decide whether an idea is worth pursuing.

SMART objectives

Business targets that are Specific, Measurable, Achievable, Relevant and Time-bound. They allow managers to check progress and judge performance objectively.

Business plan

A written document setting out the business idea, target market, competitors, marketing and production plans, finance needed and expected profit. It guides the owner and supports loan applications.

Sole proprietorship

A business owned by one person with no separate legal personality and unlimited liability. It is simple to form, the owner keeps all profit and bears all losses.

Limited liability

A legal position where an owner's loss is restricted to the capital they have invested. Personal assets are protected if the company cannot pay its debts.

Partnership

A business owned by two or more partners, usually up to twenty, who share capital, profits and losses according to a partnership agreement. Liability is generally unlimited.

Cooperative society

A business owned and democratically controlled by its members, each having one vote. Surplus is shared as dividends or patronage refunds, and service motive outweighs profit.

Span of control

The number of subordinates directly supervised by one manager. A wide span suits routine work; a narrow span suits complex work requiring close guidance.

Marketing mix

The combination of Product, Price, Place and Promotion used to satisfy a chosen target market. The four elements must be consistent with each other.

Batch production

A method where identical items are produced in groups before the process switches to another product. It balances flexibility with some economies of scale.

Controlling function

The management task of measuring actual performance against planned targets, identifying variances and taking corrective action to keep the business on course.

Accounting equation

Assets equal Capital plus Liabilities. Every transaction changes at least two elements by equal amounts, so the equation always remains in balance.

Dual aspect concept

The principle that every transaction has two equal and opposite effects, giving one debit and one credit. It is the basis of the double-entry system.

Business entity concept

The rule that a business is treated as separate from its owner for accounting purposes. Private transactions of the owner are excluded from the business records.

Capital

The owner's claim on the net assets of a business, calculated as total assets minus total liabilities. Profit increases capital while drawings and losses reduce it.

General journal

A book of prime entry used for transactions that do not fit the specialised journals, such as opening entries, corrections of errors and purchase of assets on credit.

Imprest system

A petty cash method where a fixed float is maintained. At the end of each period the cash spent is reimbursed, restoring the float to its original amount.

Trial balance

A list of all ledger balances at a date, with debits and credits in separate columns. Equal totals show arithmetic accuracy but do not prove the records are error-free.

Error of principle

A bookkeeping error where a transaction is entered in the wrong class of account, such as treating a non-current asset purchase as an expense. It does not disturb the trial balance.

Cost of sales

Opening stock plus purchases plus carriage inwards minus closing stock. It represents the cost of goods actually sold during the period and is deducted from sales to find gross profit.

Accrued expense

An expense incurred during the period but not yet paid. It is added to the expense in the profit and loss account and shown as a current liability.

Straight-line depreciation

A method charging an equal annual amount, calculated as cost minus residual value divided by useful life. It suits assets that lose value evenly over time.

Gross profit percentage

Gross profit divided by sales, multiplied by 100. It shows the margin earned after deducting cost of sales and is used to judge pricing and purchasing efficiency.

Quick ratio

Current assets excluding stock, divided by current liabilities. It tests whether a business can meet short-term debts without relying on selling stock.

Break-even point

The sales volume at which total revenue equals total cost, giving neither profit nor loss. It is calculated as fixed costs divided by contribution per unit.

Working capital

Current assets minus current liabilities. It represents funds available for day-to-day operations and must be sufficient to cover stock, debtors and cash needs.

Cash flow forecast

A statement of expected cash receipts and payments by period, showing opening and closing balances. It helps a business anticipate shortages and arrange finance in advance.