Gross and Net profit, Income and Expenditure Flashcards
GROSS PROFIT FORMULA
SALES REVENUE-COST OF SALES
NET PROFIT FORMULA
GROSS PROFIT- ALL OTHER EXPENSES
COST OF SALES
OPENING STOCK+MATERIAL- CLOSING STOCK
CAPITAL INCOME
£ NEEDED BEFORE OPENING THE BUSINESS
TYPES OF CAPITAL INCOME
1) LT LOAN: over 1 year, with interest
2) MORTGAGES: only for properties, LT loan, 25-30 yrs, with interest
3) SHARES: investors, share of profit (dividend)
4) OWNER’S CAPITAL: own savings
5) DEBENTURES: LT loan, large sum, pay full amount back+interest on a future agreed date (10-20 yrs)
REVENUE INCOME
£ COMING IN WHEN THE BUSINESS IS UP AND RUNNING
TYPES OF REVENUE INCOME
1) CASH SALES: immediate payments
2) CREDIT SALES: delayed payments
3) RENT RECEIVED: when a business rents out a property it own (£ coming in)
4) COMMISSION RECEIVED: selling something on someone’s else behalf
5) INTEREST RECEIVED: money earned on savings
6) DISCOUNT RECEIVED: when a business pays a reduced price, money saved=income
TRADE PAYABLES DEFINITION
MONEY THE BUSINESS OWES
TRADE RECEIVABLES DEFINITION
MONEY OWED TO THE BUSINESS
LIQUIDITY
ability of a business to pay day-to-day bills
having sufficient cash or current assets that can be easily converted into cash
CAPITAL EXPENDITURE
assets that the business plans to use over a long period of time
TYPES OF CAPITAL EXPENDITURE
1) NON-CURRENT ASSETS:
- land
- buildings and premises
- machinery and equipment
- vehicles
- fixtures and fittings
2) INTANGIBLE ASSETS:
- good will
- patent
- trademarks
- brand name
REVENUE EXPENDITURE
day-to-day costs incurred in running a business
TYPES OF REVENUE EXPENDITURE
1) RATES
2) HEATING AND LIGHTING BILL
3) WATER BILL
4) INSURANCE
5) ADMINISTRATION
6) TELEPHONE
7) POSTAGE
8) STATIONERY AND PRINTING
9) SALARIES
10) MARKETING
11) REDUCING-BALANCE DEPRECIATION
12) STRAIGHT-LINE DEPRECIATION
13) WAGES
14) BANK CHARGES
15) INTEREST PAID
16) DISCOUNT ALLOWED
17) INVENTORY
18) RENT
