chapter 24, 25

Question 1

what are final accounts

Answer 1

financial records of business transactions produced at end of year

Question 2

what are income statements

Answer 2

record income and costs, to calculate profit/loss made at the end of year

Question 3

profit equation

Answer 3

total revenue-total cost

Question 4

why is profit important

Answer 4

1.indicator of success
2.source of finance
3.reward for risk taking

Question 5

what are the 2 types of final accounts

Answer 5

1.income statement
2.statement of financial position

Question 6

what is the statement of financial position

Answer 6

shows the value of the business/shareholders equity

Question 7

value of business/shareholder equity equation

Answer 7

1.total assets-total liabilities (owned-owed)
2.share capital+profit loss

Question 8

what are sections of an income statement

Answer 8

1.gross profit
2.net profit
3.retained profit

Question 9

when is gross profit made

Answer 9

when sales revenue is greater than costs of goods sold

Question 10

equation for gross profit

Answer 10

revenue-cost of sales

Question 11

equation for net profit

Answer 11

gross profit-expenses+non trading income if exists

Question 12

equation for retained profit

Answer 12

net profit-tax-dividends

Question 13

working capital equation

Answer 13

current assets-current liabilities

Question 14

capital employed equation

Answer 14

shareholders equity+non current liabilities