BPP University College Of Professional Studies Limited (BPP)
Notes on Business Accounts (Business Law & Practice) for the LPC at BPP University. These revision notes summarise key SGS course content in a way that is easy to understand and helped me achieve 95% on the BLP exam.
BPP University College Of Professional Studies Limited (BPP)
Legal Practice Course
Business Law and Practice
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BPP LPC – Business Accounts Exam Notes
PART 1 – Trial Balance & Financial Statements
à Each transaction will have a dual effect on the Balance Sheet.
ALCIE Classification:
- Assets (something you own e.g. motor vehicles, cash at bank)
- Liabilities (something you owe e.g. debts)
- Capital (injection of value from the owner)
- Income
- Expenses
Assets:
- Non-current assets = any fixed asset, tangible (e.g. a building, land, machinery) or intangible
(e.g. a trademark), owned by a business that will enable profit. To be a fixed asset, it must be
held by the company for over a year and provide some long-lasting benefit to the company.
- Current assets = Cash and items owned by the business (or owed to the business) which can
quickly be turned into cash (within 1 year). e.g. stock/inventory; debtors/receivables; cash.
Liabilities:
- A liability is owed by the business to somebody else. These are categorised as current
liabilities (broadly, those due to be paid within a year) and non-current liabilities (falling due
after one year).
- Current liability e.g. bank overdraft (repayable on demand), trade creditors/payables,
accruals, dividends declared but not yet paid.
- Non-current liability e.g. term loan.
Financial statements = Periodic reports on the performance of a business.
- Profit and Loss Account – records the income of a business throughout an accounting period
minus expenses incurred in that period, to arrive at a profit (or a loss) figure for the period.
Summary of fortunes over a passage of time.
- Balance Sheet – Records the position in respect of asset, liability and capital accounts from
the trial balance. It is a snapshot relevant on a given date. Top half (net asset value = value of
assets less liabilities) balances bottom half (capital invested to achieve the net assets).
- Financial statements are prepared in respect of each accounting period of a business.
- Profit for the year taken from the P&L appears in the Balance Sheet.
- à The two halves of the Balance Sheet always balance because the top half shows how the
money invested by the owners of the business in the bottom half has been used.
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