Gross profit revenue - the cost of the goods or services sold as revenue

The legal meaning of the term debenture is a written acknowledgement of a debt. This means there will be a contract, in writing, between the company and the lender. The contract is called the debenture deed and is held by a trustee who is required to look after the needs of the lenders. If the company does not pay interest, or repay capital, on the due date, the trustee must take action to recover what is owed to the lenders. Debentures may be secured or unsecured, depending on what is stated in the debenture deed.

An unsecured loan is one where the lender has no first claim on any particular assets of the company and, in the event of default, must wait for payment alongside all the other unsecured creditors. If there is no wording to indicate that the loan is secured, then the reader of financial statements must assume it is unsecured.

Secured loan. Where any loan is described as secured, it means that the lender has first claim to named assets of the company. Where a debenture is secured, and the company defaults on payment, the trustee for the debenture will take possession of the asset and use it to make the necessary repayment. In the event of the company not being able to pay all the amounts it owes, secured lenders come before unsecured lenders in the queue for repayment.

Deferred income arises where a business receives a government grant or receives cash for goods or services before these are provided. The cash received is reported as an increase in cash and an increase in a liability to represent the obligation to satisfy the conditions of the grant or provide the goods or services. When the conditions are satisfied the liability is reduced and the ownership interest is increased by recording the revenue.

Unrealised gains are reported in a statement of comprehensive income in the IASB system. They are reported in a statement of total recognised gains and losses in the UK ASB system

Each share has a named value which is called its nominal value. Sometimes it is referred to as the par value.

The difference between the nominal value and the market value is called the share premium. When the company issues further shares at market price the share premium is recorded separately from the nominal value.

When non-current assets are revalued, the unrealised increase in value is added to the revaluation reserve. The claim which owners have on the assets of the business because the balance sheet records a market value for an asset that is greater than its historical cost.

Minority interest The ownership interest in a company held by persons other than the parent company and its subsidiary undertakings. Also called a non-controlling interest.

Before entries are made in ledger accounts, the double entry system of bookkeeping assigns to each aspect of a business transaction a debit or a credit notation, based on the analysis of the transaction using the accounting equation.

Credit (bookkeeping system) Entries in the credit column of a ledger account represent increases in liabilities, increases in ownership interest, revenue, or decreases in assets.

The accumulation of past profits in the statement of financial position (balance sheet) is called retained earnings

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