Statement of Comprehensive Income

Question 1

What is the other name for the “statement of comprehensive income”?

Answer 1

The Income Statement

Also referred to as the “profit and loss account”

Question 2

What does the income statement show?

Answer 2

Summarises income earned and expenditure incurred over a period.

The function of this is to detail how much profit has been earned and how the profit (or loss) has been calculated

Question 3

What is the first entry on the income statement?

Answer 3

Revenue

Sales revenue measures everything the company has sold regardless of whether or not payment has been received.

Question 4

What is second on the income statement, and what can the first two entries be used to calculate?

Answer 4

Cost of Sales (Cost of goods sold)

Revenue - COGS = Gross Profit

The overall financial success of a product or service, before any overhead costs.

Question 5

How is operating profit calculated?

Answer 5

Gross Profit - Operating Expenses

Operating Profit is also PBIT / EBIT

Question 6

What costs are considered operating expenses?

Answer 6

Depreciation and Amortization

Admin Expenses

Selling and Distribution Expenses

(Other income can be added on top as a positive)

Question 7

What figure is taken to calculate Earnings per Share?

Answer 7

Profit After Tax (net profit)

Question 8

What is the difference between Capital Expenditure and Revenue Expenditure?

Answer 8

Capital expenditure is money spent on buying non-current assets.

Revenue expenditure is money spent that immediately impacts the income statement e.g. wages, rent etc.