Accounting period
The timeframe of the set of accounts to be reported on.
Sales turnover or revenues
The money that comes into a business as a result of trading activities such as selling products or services.
Income statement
Financial document that includes the income and expenditure of the business to see if it is profitable or not for an accounting period.
Costs
Expenses or expenditures. Basically, money going out and getting spent to keep the business going.
Variable costs
Cost that changes along with the number of units. Example : Raw materials and packaging. F
Fixed costs
Costs that is independent from the number of units.
Other terms for costs
expenses, overheads, expenditures
Direct costs
Costs that can be attributed to the production of a product or service.
COGS
Other term for direct costs.
Gross profit
Profit of the business after direct costs are taken away but before taxes and dividends are paid.
Net profit
Profit of the business after all costs are taken away.
Cash flow
Financial document that shows the total amount of money being transferred into and out of the business.
Cash flow forecast
Predicts potential cash flow in the future based on financial objectives.
Cash flow statement
A record of actual money transfer activities that demonstrates the real cash flow position of the business in an accounting period.
Positive cash flow
Business has money in the bank.
Negative cash flow
Business has debt or overdraft situation.
Balance sheet
Snapshot of all assets, liabilities, and capital of a business showing the income and expenses at the end of the accounting period.
Balance sheet formula
Assets = Liabilities = shareholders'/overns' equity.
Fixed assets
Long terms assets with a useful life for more than one year.
Current assets
Short-term assets expected otherwise be used in one year and is used in day-to-day operations.
Fixed assets
Least liquid asses as they take longer to turn into cash.
Depreciation
The loss of value of an asset.
Current liabilities
Short term liabilities. Creditors that must be paid in a year.
Long term liabilities
Creditors paid after more than one year.
Retained profit
Amount of net profit kept in the business other than be reinvested rather than distributes to the owners or shareholders as dividends.