Business Finance and Arithmetic –  CBSE Notes for Class 11 Entrepreneurship

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Facts That Matter

1. Transactions are of two categories: Cash and Credit transactions.
2. Type of Cost are Start up Cost, Fixed Cost and Variable Cost.
3. Cash Register : It is a book in which all cash transactions are to be recorded. Cash Register records cash and bank transactions.
4. Inflow is receipts of money in a business referred as inflow.
5. Outflow is payments made in the business referred as outflow.
6. Direct Taxes are taxes paid directly by the person to the government (The entrepreneur may be collection agent).
7. Indirect Taxes: It is the amount paid indirectly by the person to the government like while purchasing a product, etc.
8. Depreciation: Reduction in the balance of fixed asset (except land) due to wear and tear and obsolescence.
9. Credit Transactions are Credit Sales and Credit Purchases.
10. Credit Sales: When products are sold on credit which means that the buyer does not pay the money immediately.
11. Credit Purchases: When products are purchased on credit and the amount will be paid at a later date.
12. Unit of Sale: It is defined as the measure of what products are sold.
13. Unit cost: Cost of unit can be defined as the cost incurred by a company to produce, store and sell one unit of sale of a particular product or service.
14. Unit Price is the price at which one unit of sale is sold.
15. Gross Profit
16. Excess of Unit Price over Unit Cost is known as the Unit Gross Profit or Unit Gross Margin
17. Gross profit per unit = unit price – unit cost ,
18. Expenses: An expense is the value of the resource that was used up, or was necessary in order to earn the revenues during the time period.
19. Start-up cost: It is the cost which is incurred initially a business is started.
20. Operational Costs: These costs are for carrying out the day-to-day operations of the business
or enterprise.
21. Fixed costs are the ones which has to incur by virtue of the fact that one has started a business and are operating it.
22. Variable costs are those which vary as a total cost to the organization when output (number of items-goods or services-produced) varies.
23. Profit is a financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity.
24. Profit = Total Sales Revenue — Total Sales Expenses
25. Gross Profit = Total Sales — Total Cost of goods sold
26. Profit before tax = Gross Profit — Fixed Expenses
27. Cash Flow: Cash flow refers to the movement of money in and out of a business during a specific period of time.
28. Cash Flow Projection: It shows how cash is expected to flow in and out of your business.
29. Gestation Period: It is the period of not making any profit.
30. Break-even point: It is a neutral point where there is no profit nor loss occurs. Break-even point is expressed as quantity for a period (day, week, month, etc)
31. Direct tax: It is a kind of charge, which is imposed directly on the taxpayer and paid directly to the government by the persons (legal or natural) on whom it is imposed.
32. Income tax is an annual tax on income (profit). Rates and other details vary from person to person based on whether sole proprietor, partnership or corporation, income statement.
33. Corporation tax is a tax levied on the Income (Profit) of the Domestic Company or Foreign.
34. Property tax or house tax: If tax is levied on the price of a goods or service, then it is called an indirect tax, like service tax, sales tax or VAT, central excise tax, custom duty, etc.