(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
