Income Statement Flashcards
What are FINAL ACCOUNTS?
The main reason why people set up businesses is to make money. However, if they are not successful they may well incur losses instead. The calculation of profit (or loss) is probably the most important objective of accounting. Once per year, the sole trader will wish to prepare a set of final accounts. Final accounts consist of:
Income Statement
Statement of Financial Position
How many columns does and income statement have?
4
One for the list of Income and Expenditure
One for the Working
One for the Sub Total
One for the Total
Is it important to include a Title in your Income statement?
Yes
What should be included in the Income Statement Title?
The words Income Statement.
Who the Income Statement is for.
The year end.
What is the first item to appear in the Income Statement?
Sales Revenue
What is the second item to appear in the Income Statement?
Less Sales Returns
What title would you use to describe the total sales?
Net Sales
Which column in the Income Statement will sales appear in?
The last column
What is the heading of the next section of the Income Statement?
Less Cost of Sales
Which inventory record goes first - Opening or closing inventory?
Opening
Which column will the opening inventory be placed in?
The second column
List 3 other items that will appear in the cost of sales section of the Income Statement?
Carriage In, Purchase Returns, Closing Inventory
Where will purchases go in the Income Statement?
Under Cost of Sales
Would you Add Carriage In under Purchases?
Yes
Should you add Purchases and carriage in together?
Yes
Should Purchase Returns be added or taken away?
Less Purchase Returns
What comes after the Purchase Returns, if there are any?
Closing Inventory
Should the closing inventory be taken away?
Yes
How is the Gross Profit Calculated?
By subtracting total purchases from total sales.
After the Gross Profit, what is the next section of the Income Statement?
Gross Profit
List 3 items that can be included in the Expenses section of the Income Statement?
Electricity, Advertising, Carriage Out, Wages, Telephone - there are more.
What is a prepayment?
An expense that has been prepaid for example Electricity may have been paid for 1 month in advance i.e. the electricity has not yet been used.
How should you show a prepayment in the income statement?
Subtract it from the total expense. ie If electricity has been prepaid by £300, you would subtract this from the total expense.
Total Electricity: £5000
Prepayment: £300
Expenses: £4700
Where should a prepayment appear?
In the current asset section of the Statement of Financial Position
