Income Statement (Profit and Loss Account) Flashcards
Private limited companies (LTDs)
Sell their shares to friends and family.they remain in control of their business by choosing who becomes a shareholder.
Public limited companies (PLCs)
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
Limited liability
Means that owners and investors only risk the investment they put into the business.
Cost of sales calculation
(Opening stock +purchases)-closing stock =cost of sales
Ideally should be low as possible
Gross profit calculation (Income Statement)
Sales revenue-cost of sales=gross profit
Best high as possible
Total expenses Calc
The sum of all the expenses
Operating profit Calc IS
Gross profit-total expenses =operating profit
Best high as possible
Net profit before tax
Operating profit-interest on loans =net profit before tax
Best high as possible
Net profit after tax
Net profit before tax-corporation tax=profit after tax
High as possible
Retained profit calc
Profit after tax -dividens =retained profit
Who is interested in income Statement
Stakeholders- investors internal managers creditors, government creditors
Creditor
Someone who loans business money eg bank
Dividens
The reward to shareholders for investing
Retained profit
When all. Osts have been payed the money left over that can be kept within the business
Why produce income Statement
Shows business how they have performed financially at the end of the financial year
Income Statement
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
Statement of financial balance
This provides a snapshot of the businesses assets and liabilities
Current liabilities
Money that a business owes that is short term and always changing
Creditors
Organization such as the bank that the business owes money too
Long term liabilities
Liabilities also include capital and reserves. This is money that a business has borrowed in order to fund itself on a long term basis
