Business accounting
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Business and Accounting
Chapter 7
- 2. Copyright © 2007 Prentice-Hall. All rights reserved
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Balance sheet Terms
1. Assets - all the things that the business
'owns'.
2. Fixed assets - all the things a business owns
but which are not used up in production.
3. Current assets - all the things a business
owns which are used up in production.
4. Liabilities - refers to the money the business
owes to other people.
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Assets (Harta)
1. Fixed Assets: Things owned by the business
that will last for more than one year and are
not used up in production. In our example, the
fixed assets will be the things like the shed, the
boxes, the moneybox and the coats.
2. Current Assets: Things owned by the
business that will be kept for less than one
year and which are used up in production.
These might be raw materials and stocks of
goods used in production. In our example the
fruit we have each day will be our current
assets.
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1. Long-term liabilities: Money owned by the
business that will not have to be paid back
within the next year.
2. Short-term liabilities: Money owed by the
business, which has to be paid back within a
year. In our example, the money borrowed
from your parents represents your short-term
liabilities.
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Liabilities (Kewajiban)
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1. Working Capital
Sum of money that used to pay short-term debts
2. Net assets : The net value of all the assets owned by
the business
3. Capital Employed : Total long term and permanent
capital of the business which hasbeen used for the net
assets of the business
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1. Gross Profit Margin: the gross profit divided
by turnover (sales revenue)
2. Net Profit Margin: Net profit divided by
turnover (sales)
Gross profit is the difference between turnover and
the cost of sales.
Net profit is the difference between turnover and
the total costs - that includes overheads.
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1. Return on Capital Employed
There is one other commonly used accounting ratio that is
used at this level - the Return on Capital Employed, or ROCE.
ROCE is useful is helping us see how efficient the business
is in using its assets to generate profit.
To calculate the ROCE, remember that we need to divide
the profit by the total capital employed by the business. The ratio
tells us something about the way the business spends its money
and how effective it is in using that spending to generate profit -
which, after all, is a major aim of many private sector
businesses! (Which profit measure do we use, however? Gross
or net?)
At this level, we can assume that our capital employed is
the total of our assets, which we can get from the balance sheet. 8