Income Statement (Profit and Loss Account)

Question 1

Private limited companies (LTDs)

Answer 1

Sell their shares to friends and family.they remain in control of their business by choosing who becomes a shareholder.

Question 2

Public limited companies (PLCs)

Answer 2

Sell their shares on the stock exchange. This means anyone from the public can buy shares and own a percentage of the business. These businesses are the largest size and scale

Question 3

Limited liability

Answer 3

Means that owners and investors only risk the investment they put into the business.

Question 4

Cost of sales calculation

Answer 4

(Opening stock +purchases)-closing stock =cost of sales
Ideally should be low as possible

Question 5

Gross profit calculation (Income Statement)

Answer 5

Sales revenue-cost of sales=gross profit
Best high as possible

Question 6

Total expenses Calc

Answer 6

The sum of all the expenses

Question 7

Operating profit Calc IS

Answer 7

Gross profit-total expenses =operating profit
Best high as possible

Question 8

Net profit before tax

Answer 8

Operating profit-interest on loans =net profit before tax
Best high as possible

Question 9

Net profit after tax

Answer 9

Net profit before tax-corporation tax=profit after tax
High as possible

Question 10

Retained profit calc

Answer 10

Profit after tax -dividens =retained profit

Question 11

Who is interested in income Statement

Answer 11

Stakeholders- investors internal managers creditors, government creditors

Question 12

Creditor

Answer 12

Someone who loans business money eg bank

Question 13

Dividens

Answer 13

The reward to shareholders for investing

Question 14

Retained profit

Answer 14

When all. Osts have been payed the money left over that can be kept within the business

Question 15

Why produce income Statement

Answer 15

Shows business how they have performed financially at the end of the financial year

Question 16

Income Statement

Answer 16

measures the business’s performance over a given period of time usually one year
compares the income of the business against the cost of goods or services and expense incurred in earning that revenue

Question 17

Statement of financial balance

Answer 17

This provides a snapshot of the businesses assets and liabilities

Question 18

Current liabilities

Answer 18

Money that a business owes that is short term and always changing

Question 19

Creditors

Answer 19

Organization such as the bank that the business owes money too

Question 20

Long term liabilities

Answer 20

Liabilities also include capital and reserves. This is money that a business has borrowed in order to fund itself on a long term basis