Income Statemnet Flashcards
What are accounts
Financial records of a firms transactions
Who are accountants
Professionally qualified people who have the responsibility for keeping accurate accounts & produce final accounts
What are final accounts
Produced at the end of the financial year & gives detail of the profit/loss made over the year & worth of the business.
Profit formula
Revenue - cost of making products
The profit can be increased by/surplus
- increasing revenue by more than costs
- reducing the cost of making product
- combination of the above 2 points
Reasons why profit is important to private sector businesses
Reward for enterprise
Reward for risk taking
Source of finance
Indicator of success
What is an income statement
Is a financial statement that record the income of a business & all costs incurred to earn that income over a period of time.
Define revenue
Income of business during a period of time from the sale of goods/services.
Revenue formula
Price x amount sold
What is Costs of sales
Cost of producing/buying in the goods actually sold by the business during a period of time.
What is gross profit
Is made when the revenue is greater than the cost of sales
Gross profit formula
Revenue - cost of sales
What is a trading account
Shows how the gross profit of a business is calculated.
What is net profit
Profit made after all costs have been deducted from the revenue
Net profit formula
Gross profit - overhead costs/expenses
