• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Business resources P5

Extracts from this document...

Introduction

Financial Statements Financial statement is a tool which allows the business to measure their finances. There are types of financial statements. These are profit and loss account, balance sheet and cash flow forecast. However in this question I will only be looking at two of the financial statements instead of the three and these are profit and loss account and balance sheet. Profit and loss account The profit and loss account is a valuable technique which shows the business how much it has made at the end of its financial year. For that reason this will help a future investor or financial institute to make a decision if it is worth taking the risk to invest in this business. In addition to that if it is a small business it will see how much profit has been made at the end of its financial year. This is a useful technique as it will help a business plan their finances and this can help them set a budget. The structure of the profit and loss account is divided into two sectors. The top half of the profit and loss account starting from the sales to the gross profit is known as the trading account. ...read more.

Middle

Balance sheet A balance sheet is a statement of the business assets, liabilities and equity. A balance sheet is important because it gives you a snapshot of the business financial strength at a specific period of time. The structure of the balance sheet is split into five sections. At the top you have the fixed assets, and just below that you have the current assets, and below that you would have the current liabilities, then just below that you have the net assets and then you would have the financed by. Terms Definition Fixed assets Fixed assets are the assets which are owned by the business and retained by the business for a year or more. For example building, vehicles, Fixture and fittings and equipment Depreciation Depreciation is an expense that reduces the value of an asset. An asset loses its value over a period of time. For example the fixture and fittings cost �50,000 but it depreciated in value by �20,000 so the net book value would be �30,000. Current asset The current asset is the assets which are owned by the business and can be converted into the cash. ...read more.

Conclusion

Then you add the current assets together and then you deduct he current liabilities from the current assets and that will give you a working capital. In addition to that you add the working capital to the total fixed assets and that will give you a net asset. Then you have the capital and this is made up of the opening capital, drawings and profit and that will give you the closing capital. In order to work out the closing capital you need to add the opening capital to the profit and deduct the drawings and that will give you the closing capital. For the balance sheet to be correct the closing capital figure needs to be the same as the net asset figure. The items which make up a balance sheet is the fixed assets, current assets, current liabilities, net asset, financed by and the closing capital. A balance sheet is important to a business as it shows the assets of the business and the amount the business is worth. It will allow a future investor to see how much the business is worth and decide whether it is worth taking a risk in investing in this business. ?? ?? ?? ?? Abdulaziz Omar P5 - Investigating Business Resources ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. Marked by a teacher

    Business resources D1

    3 star(s)

    Another disadvantage would be that the business would find it difficult to assess and evaluate its finances then it wouldn't have a sense of direction and knowing whether it is doing good or bad. Furthermore another disadvantage would be that the business would find it challenging to create motivation among the teams due to the lack of obvious aims.

  2. Finance And Cas Flow

    Shareholders is a easy way for a private limited company to obtain finance within the business as this means that the shareholders are providing money to help the business survive financially and in return the business will pay the shareholders a sum of money which is called dividends as they are investing their own personal money to make it successful.

  1. A2 Business CourseWork

    * To act local - They say that "local customers, local cultures, local supply chains and local regulations require a tailored offer delivered by local staff." This means that they should offer each market a unique, tailored service that suites each place's needs.

  2. Profit and Loss Account

    Buying it again would be unnecessary because the equipments I am purchasing will be capable of operating for a number of years and if I buy them every year, I will waste a lot of money. Based on this, my profit and loss account should be better next year.

  1. Btec Business Level 3 Year 1 - Introduction to Accounting

    understanding of, capital and capital employed or working capital P5 Profitability These are two ratios show how much profit the firm makes compared with its size. The higher the number the greater the profit made. 1: Gross Profit: It shows how much profit the firm earns the cost of making the product.

  2. Business resources P1

    Sainsbury have job description as part of the human resource functions because it is important for the employees to know what the duties required for the job role is that they will be taking. The employee needs to know before their apply for the job that what the job role

  1. The maintenance of accurate records supplies the company with the financial data that assists ...

    Forecasted Actual Variance Sales revenue 15 000 14600 (400) Adverse Raw material 3000 3200 200 Adverse Wages 5000 4900 (100) Favourable telephone 200 160 (40) Favourable Petrol 360 390 30 Adverse electricity 120 160 40 Adverse For example, the table above illustrates that raw material costs have been under forecasted by �200 than expected, this could have happened because the prices of raw materials have risen.

  2. Finance, cash flow and insolvency

    Private limited company cannot sell their share to the public which limits the firm to raise finance; they can however be transferred and sold to other shareholders within the company, it also means that the company cannot be listed in the stock exchange.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work