Statement of comprehensive income Flashcards
What is a statement of comprehensive income
Formal financial document summarising trading activities/expenses
Shows whether a business has made a profit or loss
What do statements of comprehensive income do
Indicate profit sustainability
Informs others of business performance
Informs future target setting and decision making
May be used in negotiation with suppliers, investors and employees
What is profit
Total revenue exceeding total costs
What is the main objective for the majority of businesses
Profit maximisation
What are the 3 types of profit
Gross profit
Operating profit
Profit for the year
What is gross profit
Profit after cost of sales has been deducted and before expenses
Can be raised by increasing sales revenue/reducing cost of sales
Does not take into account indirect costs e.g promotion costs
What are costs of goods sold
Direct costs of raw materials or stock purchased to produce goods or services in a set period of time
What is operating profit
Profit after all other expenses have been deducted
Increased by increasing sales revenue/reducing overheads
Takes into account indirect costs e.g promotion costs
Corporation tax is payable on operating profit
What is profit/loss for the year
Profit or loss after tax and interest has been deducted(before the payment of dividends)
What is annual depreciation shown as on the statement of comprehensive income
An expense
What does the matching concept require
Costs are recognised at the same time as generated income
What are pre payments
Payments made in advance of the use of a product to generate income(shown as current asset on the statement of comprehensive income)
What are accruals
Payment made after the use of the product to generate income(shown as a current liability on the statement of comprehensive income)
