Income statements

Question 1

Accounts

Answer 1

are the financial records of a firm’s transactions

Question 2

Accountants

Answer 2

are the professionally qualified people who have responsibility for keeping accurate accounts and producing the final accounts

Question 3

Final accounts

Answer 3

are produced at the end of the financial year and give details of the profit or loss made over the year and the worth of the business

Question 4

How profit is made

Answer 4

• Increasing revenue by more than costs

- reducing the cost of making products

Question 5

Income statement

Answer 5

is the financial statement that records the income of a business and all costs incurred to earn that income over a period of time (ex: 1 year). It is also known as a profit and loss account.

Question 6

Revenue

Answer 6

is the income to a business during a period of time from the sale of goods or services

Question 7

Cost of sales

Answer 7

Cost of sales is the cost of producing or buying in the goods actually sold by the business during a time period.

Question 8

A gross profit

Answer 8

is made when revenue is greater than the cost of sales.

Question 9

Trading account

Answer 9

shows how the gross profit of a business is calculated

Question 10

Income statement

Answer 10

• Revenue
• Cost of sales
• Gross profit
• Other costs of running the business other than variable labour and material cost, ex: fixed costs
• taxes on profit paid by the company
• payment of a share of the profits to owners

Question 11

Net profit

Answer 11

is the profit made by a business after all costs have been deducted from revenue. It is calculated by subtracting overhead costs from gross profits.

Question 12

Depreciation

Answer 12

is the fall in the value of a fixed asset over time

Question 13

Retained profits

Answer 13

is the net profit reinvested into the business after deducting tax and payments to owners, such as dividends.