profit and loss account Flashcards
what is profit and loss account also called as?
statement of comprehensive income
what is a profit and loss account?
a summary of the enterprise’s activities over a specitic period of time, usually a year.
why is the profit and loss account used by several interested group of people?
to understand how well the enterprise is performing
what is the sales revenue?
receivea by the enterprise from selling
Its products
why is the sales revenue called sales, turnover and the net sales?
because it takes into account any
price discounts or goods returned by customer
what does the cost of sales include?
the cost of making the products
how do you calculate the gross profit?
sales revenue - cost of sales
what are expenses?
the indirect costs incurred when running an enterprise
what are listed separately in the profit and loss account?
the expenses
when can the net profit be calculated?
once sales, cost ot sales and expenses are identified.
how do you calculate the net profit?
gross profit - expenses
purpose of profit and loss account:
what does the financial document show from sales of goods and services?
how much revenue the enterprise has received
purpose of profit and loss account:
what does the financial document show how much of what?
how much an enterprise has spend
purpose of profit and loss account:
what does the financial document show of what was spent?
where the money was spent
why will several groups of people be interested in the profit and loss account?
as they will want to know that the enterprise is being well run.
what are the 6 stakeholders?
managers
suppliers
emplovees
customers
shareholders (larger enterprises)
tax authorities
why stakeholders are interested in the profit and loss account;
what will managers want to know about the enterprise?
If the enterprise has achieved its target turnover and profit levels for the year.
why stakeholders are interested in the profit and loss account;
what will employees want to know about their job?
if their jobs are secure and if they are likely to recelve a pay rise
why stakeholders are interested in the profit and loss account;
what will shareholders be expected of?
expect a share or the profits.
why stakeholders are interested in the profit and loss account;
what will suppliers be able to determine?
if the enterprise is financially sound.
why stakeholders are interested in the profit and loss account;
why will customers be confident if the enterprise is secure?
particularty if they have paid for goods which will be dellvered in the future.
why stakeholders are interested in the profit and loss account;
what will the tax authorities be able to calculate?
the amount of tax owned by the enterprise
