Statement of comprehensive income Flashcards
what is a statement of comprehensive income
provides a business with an accurate account of its profit
and loss.
It records sales, costs, gross and net profit over
a period of time usually 1 year.
why is a statement of comprehensive income used
vital for understanding the business’s position financially.
define cost of goods sold
includes all of the costs and expenses directly related to the production of goods.
what is inventory
goods available for sale and raw materials used to produce goods available for sale.
what is gross profit
profit a company makes after
deducting the costs associated with making and selling
its products, or the costs associated with providing its
services.
what is net profit
measurement of a company’s profit once operating costs, taxes, interest and depreciation have all
been subtracted from its total revenues.
what are expenses
the cost of operations that a company incurs to generate revenue.
what is depreciation
an accounting method of allocating the cost of a tangible or physical asset over its useful life or
life expectancy.
Depreciation represents how much of an asset’s value has been used up.
what are the two ways of calculating depreciation
straight line method
reducing balance method
what is historic value
The cost of an asset when it was first purchased
what is expected life
How long the asset is expected to be used within the business
what is residual value
The value of the asset at the end of its expected life.
straight line depreciation
historical value - residual value / expected life
what is a pre payment
when an expense is made in advance of the period where it is used.
what is an accrual
when an expense is paid after
the period where it was incurred.
