(income statements 24) Flashcards
accounts:
financial records of a firms transactions
accountants:
professionally qualified people who have the responsibility of keeping track of accounts
final accounts:
produced at the end of the year which gives details of the profit and loss
income statement:
financial statement recording the costs incurred to earn income
revenue:
income a business generates at the time of sale
cost of sales
cost of producing or buying goods actually sold by the business
gross profit:
when revenue is greater than cost of sales
trading account:
shows how the gross profit of a business is calculated
net profit
profit made after all the costs have been deducted from the revenue
depreciation:
the fall in the value of a fixed asset over time
retained profit:
the net profit reinvested back into the business
why managers need to keep account
> to calculate profit
to see where the business stands
to manage finance
to get investment
for future expansion
why is profit important
> reward the enterprise
reward risk-taking
profits are reinvested back into the business
indicator of success
social enterprise:
government-owned businesses whose main objective is to serve people but they also need profit to reinvest into the business
why is income statement important
> business owner: look at return earning for capital investment
manager: to see performance of the business
shareholders/investors: income
potential investors: to see where the business is standing
uses of income statement:
> show profit and loss made
compare with competitors and previous years
how and where finance is used
income from each profit
dividend paid back to shareholders
expenses incurred
help decide whether or not to keep a product
