Financial Planning and Accounts

What Financial Planning and Accounts covers

Financial Planning and Accounts is examined in Component 1, Business Opportunities and Functions, and can be drawn on in the synoptic Component 3. It covers the role of the finance department, budgets and the purpose of budgeting, the benefits and drawbacks of budgets, internal sources of finance, external sources of finance, choosing the right source of finance, cash flow and cash flow forecasts, Constructing and interpreting a cash flow forecast, cash flow problems and how to improve cash flow, the income statement, gross profit and net profit and gross and net profit margins.

The 11 subtopics

Each one has its own page.

• The role of the finance departmentMain role of the finance department, four tasks carried out by a finance department and finance department's role in preparing accounts.Open →
• Budgets and the purpose of budgetingDifference between an income budget and an expenditure budget, four purposes of budgeting and how a budget helps a business plan.Open →
• The benefits and drawbacks of budgetsThree benefits of budgeting to a business, how budgeting helps a business obtain a bank loan and how budgets improve coordination between departments.Open →
• Internal sources of financeWhat is meant by an internal source of finance, three internal sources of finance and what is meant by owner's capital.Open →
• External sources of financeWhat is meant by an external source of finance, how an overdraft facility works and when interest is charged and two advantages of a bank loan over an overdraft.Open →
• Choosing the right source of financeWhy the purpose of the funds affects the source chosen, why the amount required affects the choice of source and how the cost of finance affects the choice.Open →
• Cash flow and cash flow forecastsCash flow, difference between cash and profit and why a profitable business can still run short of cash.Open →
• Constructing and interpreting a cash flow forecastFormula for net cash flow, formula for the closing balance and three typical cash inflows shown in a forecast.Open →
• Cash flow problems and how to improve cash flowWhat is meant by a cash flow problem, how overtrading causes cash flow problems and how late payment by customers causes cash flow problems.Open →
• The income statement, gross profit and net profitWhat an income statement shows, three sections of a trading, profit and loss account and what the trading account shows.Open →
• Gross and net profit marginsFormula for the gross profit margin, formula for the net profit margin and how a business could raise its gross profit margin.Open →

What you need to know

Answer each one before you reveal it.

Take Financial Planning and Accounts further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Incremental budgeting vs Zero-based budgeting

  Incremental budgeting: adjusting last year's figures for expected changes. Zero-based budgeting: requiring every item to be justified afresh.

Questions from this topic

Each one with the model answer underneath.

1. 1

   State the main role of the finance department.

   Model answer

   The finance department records, controls and reports on all the money flowing through a business. The department also provides the figures managers use to make decisions.

2. 2

   Name four tasks carried out by a finance department.

   Model answer

   A finance department prepares accounts, manages cash, sets budgets and arranges funding. Payroll and tax returns are also handled there.

3. 3

   Explain the finance department's role in preparing accounts.

   Model answer

   The finance department produces the income statement at the end of each financial year. Published accounts allow owners and lenders to judge performance.

4. 4

   Explain the finance department's role in managing cash.

   Model answer

   The finance department monitors the bank balance and forecasts future receipts and payments. Short-term borrowing is arranged before a shortfall occurs.

5. 5

   Explain the finance department's role in raising funds.

   Model answer

   The finance department identifies how much money a project needs and where to obtain it. Loan terms and share issues are negotiated by the same team.

6. 6

   Explain why the finance department works closely with the marketing department.

   Model answer

   Marketing plans require budgets that the finance department must approve and fund. Sales forecasts from marketing also feed directly into cash flow forecasts.

What is inside Levo

Six ways to work the same material.

Financial Planning and Accounts revision questions

What does Financial Planning and Accounts cover in Eduqas A-Level Business?

11 subtopics: the role of the finance department, budgets and the purpose of budgeting, the benefits and drawbacks of budgets, internal sources of finance, external sources of finance, choosing the right source of finance, cash flow and cash flow forecasts, constructing and interpreting a cash flow forecast, cash flow problems and how to improve cash flow, the income statement, gross profit and net profit and gross and net profit margins. Each one has its own page with questions and model answers.

How is Financial Planning and Accounts organised?

By the Eduqas A510QS specification, subtopic by subtopic, so it matches the order you are taught it in.