Chapter 33 - Financial Statements Flashcards
Statement of profit and loss
A statement that records the revenue, costs and profit or loss of a business over a given period of time.
Statement of financial positions
A statement that records the values of a business’s assets, liabilities and shareholders’ equity at one point in time.
Asset
An item of moetary value that is owned by a business
Liability
A financial obligation of a business that it is required to pay in the future.
Gross Profit
Revenue less cost of sales
Cost of sales
The direct cost of the goods that were sold during the financial year.
Profit from operations
Gross profit less overhead expenses ( aka operating profit )
Expenses
The overhead costs that arise in operating the business, which are deducted from gross profit to calculate profit from operations.
Profit Before Tax
Profit from operations less interest costs.
Profit For The year ( After Tax Profit )
Profit before tax less profit ( or corporate ) tax.
Dividends
The share of the profits paid to shareholders as return for investing in the company.
Low Quality Profit
One off profit that cannot easily be repeated or sustained.
High Quality Profit
Profit that can be repeated and sustained.
Shareholders Equity
The total value of assets less the total value of liabilities
Share Capital
The total value of capital raised from shareholders by the issue of shares.
