2 Financial terms

Described image
Figure 3  Understanding finance

When running a small business it is essential to understand key accounting and finance terms.

We will start by seeing what you know already.

Activity 2

Timing: Allow about 10 minutes

Try this short activity with two questions. In the first question we ask you to match finance terms with the definition. In the second question we ask you to complete the statements about VAT by selecting the most appropriate options from the drop-down lists.

Don’t worry if you get these wrong, you can see the correct answers by reviewing the quiz at the end and we do explore these ideas further later.

Interactive feature not available in single page view (see it in standard view).

Comment

Did you notice the differences between gross profit, net profit and turnover?

These terms are often confused but they are important when making decisions moving forward, we will explore these further when we look at our case studies.

Was there anything about VAT that surprised you? Did you know that the flat rate scheme existed and that it could be used by any business with a turnover less than £150,000 (figure accurate at time of writing, the HMRC website [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] will give the most up to date figures for this).

1 A business owner’s responsibilities

2.1 Value added tax (VAT)