Unit 4 - Finance

Range: Terms - Sales turnover, revenue, profit and loss, accounting period, balance, gross profit, net profit, break-even point, income statement, balance sheet, adjustment, stakeholders, costs, assets, liabilities, cash flow, corporation tax, income tax, VAT, profit margins, retained profit.  

1. The range of common terms used in financial reporting term.  

2. The importance of understanding the meaning of terms used in financial reporting.  

3. The importance of applying each term correctly in its organisational context and the potential impact of misunderstanding terms in relation to financial reporting. 

Range: 

Role - Track, analyse and report on financial activities, take snapshot of metrics, manage financial health of organisation. 

Purpose - To report on business income, examine resource usage, forecast and manage cash flow, monitor business performance, aid decision making, enable informed actions. 

1. To be able to apply each term correctly in an organisational context

2. To recognise the impact of misunderstanding a term in relation to financial reporting

3. To understand the role of financial reporting in an organisation

Range:  

Internal sources - Savings, retained profit, selling assets, owners' capital. 

External sources - Private equity, bank loans, credit cards, overdrafts, cash advances, crowd funding, investor funding – shareholders, venture capitalists, angel investors, grant funding, invoice factoring, donations, leasing, hire purchase.

Organisations - Sole Trader, Partnership, Public Limited Company (PLC), Private Limited Company, Charity, Social Enterprise.

1. Different types of finance available and reasons why these are accessed by organisations.   

2. The advantages and disadvantages of using any form of finance (internal or external) for an organisation. The risks associated with certain types of finance (e.g., bank loans and credit cards).   

3. The reasons why organisations may need additional finance, and considerations for the speed of obtaining the finance. 

Range: 

Expenditure - Staff payroll including employer pension contributions, bank fees and interest fees, premises rent, general utilities (electricity, gas, water and internet), insurance, company vehicles, materials/machinery/equipment, software. 

1. The range of expenditure that may occur within organisations.  How the occurrence of different expenditure varies depending on the size and purpose of the organisation.   

2. The definition and purpose of capital expenditure and examples of types of capital purchases made by organisation (e.g., ICT infrastructure, plant machinery). 

3. Definitions of fixed and variable costs. Examples of different fixed and variable costs in an organisation.

4.  The reasons why fixed and variable costs have different influences on overall expenditure. 

Range

Tracked and controlled - Double entry bookkeeping, budgeting, reporting (including balancesheets and profit and loss accounts/income statements), setting spending limits, auditing. 

1. The importance of tracking and controlling revenue and expenditure for an organisation and the risks associated with poor management of revenue and expenditure (e.g., reputational, financial difficulty, legal).

2. The use of double-entry bookkeeping, that every entry to an account requires a corresponding and opposite entry to a different account (debit and credit).

3. The use and importance of budgeting for an organisation, how organisations can use budgeting to develop forecasts, how budgets are controlled by using KPI’s and management accounts, the time-period of budgets such as weekly, monthly, or yearly.

4. Process of spend authorisation and the importance of having a clear authorisation process in an organisation.

5. How audits are used to control revenue and expenditure – both internally (inhouse) and externally (e.g., through an outside financial organisation).

6. How software can be used to assist the tracking and controlling of revenue and expenditure.