BTEC National Level 3 in Business: Unit 3 Personal and Business Finance

Knowledge Organiser Overview

• Includes a revision checklist, key terms and definitions, and a formula sheet.

A1: Functions and Role of Money

• Functions of Money:
  • Unit of account
  • Means of exchange
  • Store of value
  • Legal tender
• Role of Money Influences:
  • Personal attitudes towards risk, reward, borrowing, spending, and saving
  • Life stages and their financial needs/implications
  • Cultural, religious, and ethical beliefs
  • Life events causing variations in individual life cycles
  • External influences and financial effects
  • Interest rates: cost of borrowing vs. saving rewards
  • Principles for planning personal finances:
    • Avoid debt
    • Control costs
    • Avoid legal action/repossession
    • Maintain solvency and good credit rating
    • Avoid bankruptcy
    • Fund purchases, generate income, and savings
    • Set financial targets/goals
    • Provide insurance against loss/illness
    • Counter effects of inflation

A2: Different Ways to Pay

• Payment Methods and Their Pros/Cons:
  • Cash
  • Debit and credit cards
  • Cheque
  • Electronic transfer
  • Direct debit and standing order
  • Pre-paid and contactless cards
  • Charge and store cards
  • Mobile banking
  • BACS, FPS, CHAPS

A3: Current Accounts

• Types of accounts, features, pros/cons:
  • Standard
  • Packaged, premium
  • Basic
  • Student

A4: Managing Personal Finance

• Suitability of financial products/services for individual needs
• Types of Financial Products:
  • Overdrafts
  • Personal loans
  • Hire purchase
  • Mortgages
  • Credit cards
  • Payday loans
• Savings and Investments:
  • ISAs
  • Deposit/savings accounts
  • Premium bonds
  • Bonds/gilts
  • Shares
  • Pensions
• Insurance Products:
  • Car, home, life, travel, pet, health insurance

B: Exploring the Personal Finance Sector

• Financial Institutions:
  • Bank of England, banks, building societies
  • Credit unions, national savings, and investments
  • Insurance and pension companies
  • Pawnbrokers and payday loans
• Customer Communication Methods:
  • Branch, online, telephone, mobile, postal banking
• Consumer Protection:
  • FCA, FOS, FSCS, OFT, consumer credit legislation
• Information, Guidance, and Advice Providers:
  • Citizens Advice, IFAs, price comparison sites
  • Money advice service, debt counsellors, IVAs, bankruptcy

C: Understanding the Purpose of Accounting

• Purpose: recording transactions, management, compliance, performance measurement, fraud prevention
• Types of Income:
  • Capital income: loans, mortgages, shares
  • Revenue income: cash/credit sales, rent, commission, interest
• Types of Expenditure:
  • Capital expenditure: non-current/tangible and intangible assets
  • Revenue expenditure: day-to-day expenses

D: Select and Evaluate Sources of Finance

• Sources of Finance:
  • Internal: retained profit, net current assets, sale of assets
  • External: owners capital, loans, crowdfunding, mortgages, etc.

E: Break-even and Cash Flow Forecasts

• Cash Flow Forecasts:
  • Inflows/receipts and outflows/payments
  • Planning, monitoring, control, target setting
• Break-even Analysis:
  • Costs: variable, semi-variable, fixed
  • Sales and revenue calculations
  • Break-even formula and chart
  • Profit/loss areas and margin of safety

F: Complete Statements of Comprehensive Income and Financial Position

• Statement of Comprehensive Income:
  • Purpose, completion, calculation, and interpretation
• Statement of Financial Position:
  • Purpose, completion, calculation, and interpretation
• Profitability, liquidity, and efficiency measurement ratios
• Limitations of ratios

Key Terms

• Payment methods, types of accounts, borrowing, saving, investments, insurance, financial institutions, and communication methods

Formula Sheet

• Includes equations for cash flow forecasts, break-even analysis, comprehensive income, financial position, profitability, liquidity, and efficiency measurements.