Soci Key Terms

Question 1

Net sales

Answer 1

Sales less if vat registered. Total used if not registered

Question 2

Cost of goods sold

Answer 2

Opening inventory + purchases - closing inventory

Question 3

Gross profit

Answer 3

The net sales minus cost of goods sold

Question 4

Operating profit

Answer 4

The gross profit minus any selling or administrative expenses usually show. Like this for limited companies

Question 5

Net profit

Answer 5

For sole traders and partnerships it is gross profit minus expenses. For limited companies its operating minus any other expenses before tax

Question 6

Net profit after tax

Answer 6

The final profit figure once business has met tax liabilities

Question 7

Prepayments

Answer 7

Adjustments made in statement to reduce the expenses to only show the actual amount of expenses for the year

Question 8

Accrual

Answer 8

Adjustment added to the expense to make sure all costs for the year are included in the statement