UNIT 15 My Accounting Journey


Term of finance


Short term - Buying stock


Sources of Finance Medium term


When? (time) Less than one year One–five years Why? (use)


- Paying off suppliers (creditors)


- Paying expenses, e.g. wages, advertising,


insurance (current expenditure).


What? (examples) Bank overdraft (BO):


A bank overdraft is where the business is given permission by the bank to withdraw more money than is in their account.


Creditors:


Buying goods now and paying later at an agreed time.


Expenses due/accrued:


The business has the use of certain expenses for up to two months.


Leasing:


The business pays for the use of a good for an agreed time but never owns the product.


Medium-term loan:


A loan taken out by the business from a financial institution such as a bank.


Hire purchase:


HP is used by the business to purchase a good from a retailer through a HP company. The HP company pays the full cost to the retailer and the consumer repays the HP company in instalments over an agreed time.


Shares:


This is capital made up of shares purchased by shareholders. It is also called equity capital. The shareholders receive dividends.


Retained profits:


Profits kept from previous year. They are also known as reserves.


Debentures: • Long-term loan • Fixed rate of interest


• Collateral – security in case you can’t repay, e.g. the deeds of the premise.


Grants:


Non-repayable sums of money.


Sale and leaseback:


This means selling an asset and leasing it back.


- Replacing equipment/ technology


- Buying delivery vans, ICT (capital expenditure).


Long term More than five years - Buying premises or land


- Expanding into EU/global markets.


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