financial statements Flashcards
income statement
An income statement (profit statement) statement shows the profit or loss made by a company over a set period of time.
reasons to prepare an income statement
- to calculate total costs
- to calculate cost of sales
- to calculate profit/loss for the year
- legal reasons
- tax reasons
- comparison
sales
this is the total value of the goods sold to customers
cost of sales
This is the direct cost of the goods that have been sold.
expenses
This is all the indirect costs incurred by the business such as rent, wages and electricity.
gross profit
This is the difference between the sales and the cost of sales.
net profit
The actual profit made by the business after all expenses have been deducted.
statement of financial position
A statement of financial position shows.
- everything owned by the business
- everything owed by the business
- the value of the business at a particular date
fixed assets
This is the value of major items like premises.
Fixed assets, by their nature, are used by the business for several years.
current liabilities
This is the value of the organisation’s short-term debts – those that must be paid back within one year.
current assets
This is the value of cash, or near cash items, available to the business
long term liabilities
This is the value of any long term debts
working equity
This is the value of funds that a business can access immediately and which is needed to operate day-to-day.
