Profit And Loss ACCOUNT Flashcards
What is the definition of a profit and loss account / statement
It is a financial statement that summarises the revenue , costs and expenses incurred during a specific period of time
What is the profit and loss account also known as
An income statement
What is the costs of sales
The direct cost to a business of producing a products eg what goes directly into mankind the actual product
Eg flour for bread
What does the cost of sales never include
Staff wages
How do u calculate the gross profit of a business
Sales revenue - cost of sales
What is the definition of gross profit
The difference between the sales revenue and the cost of sales
How to u calculate the net profit of a business
Gross profit - expenses
Net profit could also be referred to as what ?
The bottom line
What is the definition of net profit
The money made from selling a products after all other costs have been deducted
How can a business increase is gross profit
It can reduces its cost of sales eg cheaper raw materials, lower prices suppliers
It can increase its sales revenue
How can a business increase its net profit
It can reduce expenditure- cheaper mortgage repayments or rent
Reduce number of employers
Use free methods of advertising
How can a business use its net profit
To pay tax
To help the business grow
To reinvest the profit back into the business
