Profit and Loss Accounts

Question 1

What does Sales Revenue mean and what are the other terms for it?

Answer 1

Income earned from selling goods or services. Other terms: Turnover or sales income

Question 2

What does the Cost of Sales mean and what are the other terms for it?

Answer 2

Expenses directly attributable to sales of goods and services. Other terms: Cost of Goods Sold (COGS).

Question 3

What does Overheads mean and what is another term for it?

Answer 3

Cost of running the business not directly related to the sales of goods or services. Other term: Operating expenses

Question 4

What does ‘Other Income’ mean and what are the other terms for it?

Answer 4

Income from sources outside the normal trading activities. Other terms: Non operating income or Non trading income.

Question 5

What does Exceptional Items mean?

Answer 5

Unusual income or expense, part of the normal business, shown separately in the profit and loss account.

Question 6

What does investment income mean and what is another term for this?

Answer 6

Interest on investments or bank accounts. Other term: Interest receivable.

Question 7

What does Interest payable mean and what is another term for this?

Answer 7

Interest paid to lenders (eg. on a bank loan). Other term: Interest charges.

Question 8

What does tax mean and what is another term for this?

Answer 8

Payment to the government of tax owed (limited company). Other term: Corporation Tax.

Question 9

What are extraordinary items and what is another term for this?

Answer 9

Unusual and significant income or expense, not part of the normal business, shown separately in the profit and loss account. Other term: Extraordinary results.

Question 10

What are dividends?

Answer 10

Payments to the shareholders on the profit earned for the year. (Applies only to limited companies).

Question 11

What is the formula for Gross Profit?

Answer 11

Sales Revenue minus Cost of Sales

Question 12

What is the formula for Operating Profit?

Answer 12

Gross Profit minus Overheads

Question 13

What is the formula for Net Profit before Interest and Tax?

Answer 13

Operating Profit plus other income.

Question 14

What is Net Profit before Interest and Tax also known as?

Answer 14

Profit on ordinary activities before tax
or
EBIT (Earnings Before Interest and Tax

Question 15

What is the formula for Net Profit before Tax?

Answer 15

Net Profit before Interest and Tax minus Interest.

Question 16

What is Net Profit before Tax also known as?

Answer 16

Pre-Tax Profit or PBT

Question 17

What is the formula for Net Profit After Tax?

Answer 17

Net profit before tax minus tax

Question 18

What is Net Profit After Tax also known as?

Answer 18

Profit on ordinary activities after tax or PAT

Question 19

What is the formula for Profit for the year?

Answer 19

Net Profit after Tax +/- Extraordinary items (if applicable)

Question 20

What is another term for Profit for the Year?

Answer 20

Profit for the Period or Distributable Profit.

Question 21

What is the formula for Retained Profit?

Answer 21

Profit for the year minus dividends.

Question 22

What is retained profit also known as?

Answer 22

Reserves

Question 23

What is Sales Revenue?

Answer 23

The amount of money that the business has earned from the sale for all its goods or services during the trading period.

Question 24

What are Overheads?

Answer 24

Running Costs that are not directly related to the production of the business’s goods or services.