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Simple Business Accounting - Extension Activity

Having gone through the basic principles using this simple example, you might want to stretch yourself a little and have a look at some more detailed accounts.

Use the Business Profiles section on Biz/ed (http://www.bized.co.uk/cgi-bin/ratios/ratiodata.pl) and select any two businesses from the list. Bring up the profit and loss account and balance sheets for the two businesses. You will see that many of them have accounts for more than one year.

  • Calculate the gross and net profit margins for each year available.
  • Use the balance sheets to calculate the ROCE for each available year.
  • Comment on the performance of the two businesses over the period analysed.

Terms

Person doing a crossword

See if you can remember all the terms we have come across by having a go at our crossword. Copyright; Emin Ozkan, from stock.xchng.

We have come across a lot of new terms in this resource. They can be difficult to remember and can be a bit confusing at times. Try completing the crossword below to help revise your understanding of these terms.

11    2  3  4  5    
                   
                   
                   
               6   
                   
                   
2                   
       3           
   7               
   4               
                   
       9  10   11    
 8     5           
                   
 6                  
                   
                   
 7                  
                   

Clues

Across

  1. A flow rather than a stock, this shows the revenues and costs over a period of a year (6,3,4,7)
  2. The profit expressed as a percentage of the cost of the product (4,2)
  3. All the things that a business owns or is owed but which are not used up in production (5,6)
  4. and 6 down: all the things owned by a business but which are used up during production (7,6)
  5. These change as the level of output or sales change - rising as output rises, falling as output falls. (8,4)
  6. and 7 down: A snapshot of a business at a point in time. (7,4)
  7. The difference between the selling price and the cost of production usually expressed as a percentage. Can be net or gross. (6,6)

Down

  1. A ratio giving an indication of the effectiveness of the business in using its assets to generate profit. (4)
  2. All the things owned by a company - buildings, equipment, machinery - even its image or logo might be one of these! (6)
  3. All the things owed by a business to someone else - could be a bank or a shareholder. (11)
  4. Another word for revenue not to be confused with cost of sales! (5)
  5. The price you have to pay to purchase all the inputs and resources used in production - not the same as price! (4)
  6. and 4 across: all the things owned by a business but which are used up during production (7,6)
  7. and 6 across: A snapshot of a business at a point in time. (7,4)
  8. and 10 down: These can change but do not depend on the level of output. (5,4)
  9. Another word for fixed costs. (8)
  10. and 8 down: These can change but do not depend on the level of output. (5,4)
  11. The word given to the price times the amount sold. (7)

You can find a printable version of this crossword here.

Once you have tried your best, feel free to have a look at the solution.

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