Income Statement Flashcards
1
Q
What does the IS measure?
A
The wealth generated.
2
Q
How is it divided?
A
Profit GON:
- Gross Profit
- Operating Profit
- Net Profit (Profit for the period)
3
Q
What is the Gross Profit and how is it calculated?
A
Profit from buying and selling without taking into account any other expense or revenue.
GP = Sales revenue - Cost of Sales
4
Q
What is the Operating Profit?
A
Expenses incurred in running the business (Rent, Wages, Depreciation etc.)
5
Q
What is the Net Profit?
A
Any non-operating income (interest receivables) or interest on borrowings. Added to the Equity part in the SoFP.
6
Q
Cost of Sales formula
A
CoS = Opening Inventories + Purchases - Closing Inventories
