Summary Unit 3: Personal and Business Finance - Glossary of business finance
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Course
Unit 3 - Personal and Business Finance
Institution
PEARSON (PEARSON)
This document is a glossary of some of the business finance definitions. It also goes into detail about the types of business income, the benefits and the drawbacks of each. This aligns with the specification for unit 3 btec business: personal and business finance.
Glossary – Business Finance:
Financial transactions = actions by a business that involve money either going into or out of
a business – for example, making a sale or paying a bill.
HMRC = HM is an abbreviation for Her (or His) Majesty’s, and the RC stands for Revenue and
Custom. HMRC is a British government department responsible for the collection of all types
of taxes.
Fraud = when an individual acquires company money for personal gain, through illegal
actions.
Profit = the percentage of margin mark-up over the unit cost. Aka a surplus achieved when
the total revenue (income) from sales is higher than the total costs of a business.
Loss = shortfall suffered when total revenue from sales is lower than the total cost of the
business.
Gross profit = sales revenue minus cost of goods sold (the cost of the actual materials used
to produce the quantity of goods sold).
Sales revenue = quantity sold multiplied by the selling price.
Net profit = gross profit minus other expenses, for example, rent and advertising.
Trade receivables = money owed to a business from sales made but not yet paid for (Owed)
Trade payables = money the business owes from supplies purchased but not yet paid for
(Owes)
Types of business income:
Capital income – money invested by the owners or other investors to set up a business or
buy equipment (buy things that stay in the business for a certain amount time)
Revenue income – money coming into the business from their normal day to day functions
– selling goods or providing a service. (Depends on the activities that the business does to
bring money in)
Capital – mortgages, loan, shares, owner’s capital, debentures.
Cash sales – money coming in from the sales of goods and services. The customer pays
there and then with credit card, cash etc
(+) business gets it straight away
(-) hard to keep track of what’s coming in
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