GCE O/L Business & Accounting Studies key terms

Any organised activity that produces goods or provides services with the aim of satisfying human wants, usually by combining resources such as labour, capital and land.

Physical, tangible items produced for sale or use, such as furniture, food or clothing, which can be stored and transported to the buyer.

Intangible activities performed for a customer, such as teaching, transport or banking, which are consumed as they are provided rather than owned.

Needs are essentials required for survival such as food and shelter; wants are desires for comfort or pleasure that are not essential, and both drive demand for business output.

The condition where resources are limited while human wants are unlimited, forcing people and businesses to make choices about how resources are used.

The value of the next best alternative given up when a choice is made, for example the income forgone when an owner leaves a job to start a business.

Any person or group with an interest in how a business performs, including owners, employees, customers, suppliers, lenders, the government and the local community.

A person who identifies a business opportunity, gathers and organises resources, takes the risk of loss, and manages the venture in the hope of earning profit.

A specific proposal for a product or service that a market may need, developed by observing problems, gaps or changing customer preferences before any resources are committed.

A written document describing a venture's objectives, target market, operations, costs, expected income and funding needs, used to guide the owner and persuade lenders or investors.

The systematic collection and analysis of information about customers, competitors and prices, gathered through surveys, interviews or observation to support business decisions.

The particular group of customers, defined by age, income, location or lifestyle, that a business aims to serve with its product or service.

The combination of four elements a business controls to attract buyers: the product itself, its price, the place where it is sold, and promotion used to inform customers.

Activities such as advertising, sales offers, personal selling and publicity used to make customers aware of a product and persuade them to buy it.

A business owned and controlled by one person, who keeps all profits but bears unlimited liability for the debts of the business.

A business owned by two or more people who share capital, profits and management under an agreement, usually with unlimited liability for business debts.

A business registered as a separate legal entity from its owners, with its own name and finances, owned by shareholders whose liability is normally limited.

A person or organisation that owns shares in a company, giving a right to a share of profits as dividends and a vote at general meetings.

The protection that limits an owner's loss to the amount invested in the business, so personal assets are not used to settle company debts.

The position where an owner is personally responsible for all business debts, so personal property may be sold to pay creditors if the business cannot pay.

A business owned and democratically controlled by its members, who pool resources to obtain services such as cheaper supplies or shared marketing, with profits shared according to member contribution.

The process of planning, organising, directing and controlling resources so that a business reaches its stated objectives efficiently and effectively.

The arrangement of roles, departments and reporting lines within a business, showing who is responsible to whom and how work is divided.

A specialised area of activity within a business, such as production, marketing, finance or human resources, each contributing to the overall objectives.

The function that recruits, trains, motivates and looks after employees, and handles matters such as wages, discipline and workplace welfare.

The business function that converts inputs such as materials, labour and machinery into finished goods or services of the required quality and quantity.

The process of identifying, recording, classifying and summarising financial transactions, then reporting the results so that owners and others can make informed decisions.

A business event that changes the financial position of a business and can be measured in money, such as a cash sale or the purchase of stock on credit.

The relationship stating that assets equal liabilities plus owner's equity, which must remain balanced after every transaction is recorded.

A resource owned or controlled by a business from which future benefit is expected, such as cash, stock, equipment or money owed by debtors.

A present obligation of a business to pay money or provide goods or services to another party in the future, such as a bank loan or unpaid supplier account.

The owner's claim on the business, calculated as assets minus liabilities and increased by capital introduced and profit, and reduced by drawings and losses.

The money or other resources the owner puts into the business to start or expand it, recorded as an increase in owner's equity.

Money or goods taken out of the business by the owner for personal use, which reduces owner's equity and is not treated as a business expense.

The bookkeeping rule that every transaction is recorded in at least two accounts, one debit and one credit of equal value, so that total debits always equal total credits.

The main book of accounts in which transactions are classified and posted to separate accounts for assets, liabilities, income, expenses and equity.

The first records in which transactions are written before posting to the ledger, including the sales journal, purchases journal, cash book and general journal.

A list of all ledger account balances at a given date, showing debit and credit columns that should agree in total, used to check arithmetical accuracy.

Reports prepared at the end of an accounting period, mainly the income statement and the statement of financial position, summarising performance and position.

A report showing the income earned and expenses incurred over a period, ending with the profit or loss for that period.

A report at a particular date listing assets, liabilities and owner's equity, demonstrating that the accounting equation balances.

The amount by which total income exceeds total expenses over a period; when expenses are greater than income the result is a loss.

A cost incurred in running the business during a period, such as rent, wages, electricity or depreciation, which reduces profit.

The systematic reduction in the recorded value of a non-current asset over its useful life, reflecting wear, use or becoming out of date.

A customer who has bought goods or services on credit and still owes the business money at the reporting date.

A person or business to whom money is owed, for example a supplier who has provided goods on credit and has not yet been paid.

Goods held by a business for resale or for use in production, valued as an asset until sold, when their cost becomes an expense.

The movement of money into and out of a business over a period, showing whether enough cash is available to pay bills as they fall due.

The money available for day-to-day operations, calculated as current assets minus current liabilities, indicating short-term financial health.

The level of sales at which total income equals total cost, so the business makes neither profit nor loss.

A cost that stays the same in total regardless of how much is produced or sold, such as rent or insurance.

A cost that changes in total in direct proportion to output or sales, such as raw materials or packaging.

A plan of expected income and expenditure for a future period, used to control spending and compare actual results with what was planned.

Money raised by a company from issuing shares to shareholders, which becomes part of the owners' funds and needs no fixed repayment.

The part of a company's profit distributed to shareholders, usually calculated per share and paid after the directors decide on the amount.

A sum borrowed from a bank or other lender, repayable over an agreed period with interest charged on the amount outstanding.

The charge a borrower pays for the use of borrowed money, normally stated as a percentage of the amount owed over a period.