Business Finance and Accounts

What Business Finance and Accounts covers

Business Finance and Accounts is examined in Units 1 and 2, and again in Units 3 and 4 — the finance content is built on at every stage. It covers internal sources of finance, loans, overdrafts and trade credit, share capital and venture capital, leasing and debt factoring, choosing an appropriate source of finance, finance for entrepreneurs and SMEs in Wales, revenue, costs and profit, types of cost, contribution and break-even, break-even charts and the margin of safety, budgets and budgeting, cash flow forecasting, improving cash flow, the income statement and gross and net profit margins.

The 15 subtopics

Each one has its own page. WJEC AS Business students sit this topic in the first year.

• Internal sources of financeInternal source of finance, three main internal sources of finance and owner's capital.Open →
• Loans, overdrafts and trade creditExternal source of finance, bank loan and what is meant by collateral.Open →
• Share capital and venture capitalShare capital, ordinary shares and preference shares and rights issue.Open →
• Leasing and debt factoringMain disadvantage of leasing, operating lease and a finance lease and what is meant by acquiring an asset on hire purchase.Open →
• Choosing an appropriate source of financeHow a firm's legal structure limits its choice of finance, how the choice of finance affects a business's stakeholders and why heavy borrowing threatens survival in a downturn.Open →
• Finance for entrepreneurs and SMEs in WalesThree kinds of help Business Wales offers an entrepreneur, main forms of finance the Development Bank of Wales provides and why the Welsh Government funds a development bank.Open →
• Revenue, costs and profitFormula for total revenue, formula for total costs and formula for profit.Open →
• Types of costFixed costs, variable costs and semi-variable cost and explain why it is one.Open →
• Contribution and break-evenFormula for contribution per unit, formula for total contribution and formula linking total contribution to profit.Open →
• Break-even charts and the margin of safetyWhat is measured on each axis of a break-even chart, fixed cost line on a break-even chart and total cost line on a break-even chart.Open →
• Budgets and budgetingIncome budget and an expenditure budget, three purposes of budgeting and how a budget helps a business control its costs.Open →
• Cash flow forecastingCash flow, cash inflows and cash outflows and formula for the closing balance.Open →
• Improving cash flowFour common causes of cash flow problems, how seasonal demand causes cash flow difficulties and how poor credit control damages cash flow.Open →
• The income statementThree sections of an income statement, formula for gross profit and formula for cost of sales using inventory figures.Open →
• Gross and net profit marginsFormula for the gross profit margin, formula for the net profit margin and two ways a business could improve its gross profit margin.Open →

What you need to know

Answer each one before you reveal it.

Take Business Finance and Accounts further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Contribution vs Profit

  Contribution: what is left from the selling price of a unit once its variable costs are paid, and which goes towards covering the fixed costs of the business. Profit: What is left over once every cost, fixed and variable, has been taken from revenue.

• Gross profit vs Net profit

  Gross profit: revenue less the cost of sales, measured before any overheads are deducted. Net profit: What remains once both the cost of sales and all the overheads of running the business have been taken from revenue.

• Bank loan vs Overdraft

  Bank loan: a fixed sum borrowed and repaid with interest in instalments over an agreed term, usually at a lower rate of interest than an overdraft. Overdraft: An arrangement allowing a business to withdraw more from its account than the account holds, up to an agreed limit, charged only on the amount used and repayable on demand.

Questions from this topic

Each one with the model answer underneath.

1. 1

   What is meant by an internal source of finance?

   Model answer

   An internal source of finance is money raised from within the business itself, without borrowing from or selling a stake to anyone outside it.

2. 2

   Name the three main internal sources of finance.

   Model answer

   The three main internal sources are the owner's own capital, retained profit and the sale of assets.

3. 3

   Define owner's capital.

   Model answer

   Owner's capital is money the owner or owners put into the business from their personal savings or wealth.

4. 4

   Give one advantage of using owner's capital to start a business.

   Model answer

   It costs nothing in interest and the owner keeps full control, because no lender or new shareholder is involved.

5. 5

   Explain one drawback of relying on the owner's own capital.

   Model answer

   The amount available is limited to the owner's personal wealth, and the owner stands to lose their own savings if the business fails.

6. 6

   What is retained profit?

   Model answer

   Retained profit is profit kept inside the business after tax and any dividends have been paid, rather than distributed to the owners.

What is inside Levo

Six ways to work the same material.

Business Finance and Accounts revision questions

Is Business Finance and Accounts examined at AS in WJEC Business?

Yes. It sits in AS Unit 2, which you take in the first year, so it is on the AS paper as well as counting towards the full A level.

What does Business Finance and Accounts cover in WJEC AS-Level Business?

15 subtopics: internal sources of finance, loans, overdrafts and trade credit, share capital and venture capital, leasing and debt factoring, choosing an appropriate source of finance, finance for entrepreneurs and smes in wales, revenue, costs and profit, types of cost, contribution and break-even, break-even charts and the margin of safety, budgets and budgeting, cash flow forecasting, improving cash flow, the income statement and gross and net profit margins. Each one has its own page with questions and model answers.

How is Business Finance and Accounts organised?

By the WJEC 601-5238-2 specification, subtopic by subtopic, so it matches the order you are taught it in.