3.4B Final Accounts - P+L Account Flashcards
What does the “profit and loss” account show?
This shows a firm’s net profit (or loss) after all production costs have been subtracted from the organization’s revenues, each year.
What is “sales revenue”?
The money the organization earns from selling goods and services
What is “cost of goods sold (COGS)”?
The direct costs of production. (eg. material, supplies..)
What is “gross profit”?
Refers to the profit from a firm’s everyday trading activities
How do you calculate “gross profit”?
Gross Profit = Sales revenue - COGS
What are “expenses”?
A firm’s indirect costs of production (eg. rent, management salaries, marketing campaigns..)
Where do we include “depreciation” in the profit and loss accounts?
In “Expenses”
What is the “net profit before interest and tax”?
The value of a firms profit (or loss) BEFORE deducting interest payments on loans and corporate taxes.
What is “tax”?
The compulsory deductions paid to the government as a proportion of a firm’s profit
What are “dividends”?
The payments from a company’s net profit paid to shareholders (owners) of the business.
(the amount of dividends/ profit paid out is decided by the board of directors, and is different for each business)
What is the “net profit after interest and tax”?
The value of a firms profit (or loss) AFTER deducting all interest payments and taxes. This belongs to the owners of the business and can be paid out as “dividends”.
What is the “retained profit”?
Any funds left over from the “net profits after interest and tax” that is NOT paid out to shareholders (dividends). This remains inside of the business and can be kept for it’s own use.
What is the structure of a “Profit and Loss account”?
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What ALWAYS goes at the top of the “Profit and Loss account”?
Sales revenue
What ALWAYS goes at the bottom of the “Profit and Loss account”?
Retained profit
