Statement of Comprehensive Income Definitions

Question 1

Sales Revenue

Answer 1

Sales revenue is the money a company earns from selling its goods and services to customers. It is income the company earns exclusively from the sale of goods or services. It does not include sources of income that derives from anything other than sales.

Question 2

Cost of goods sold

Answer 2

Cost of goods sold (COGS) includes all of the costs and expenses directly related to the production of goods. It excludes indirect costs such as overhead in order to calculate gross profit and gross margins.

Question 3

Inventory

Answer 3

Inventory is the term for the goods available for sale and raw materials used to produce goods available for sale. Inventory represents one of the most important assets of a business because the turnover of inventory represents one of the primary sources of revenue generation.

Question 4

Gross Profit

Answer 4

Gross profits is the profit a company makes after deducting the costs associated with making and selling its products, or the cost associated with providing its services. Gross profits will appear on a company’s income statement and can be calculated by subtracting the cost of goods sold from revenue (sales).

Question 5

Net profit.

Answer 5

Net profit is the measurement of a company’s profit once operating costs, taxes, interest and depreciation have all been subtracted from its total revenues. The term is often referred to as a company’s ‘bottom line’ and may also be described as ‘net earning’ or ‘net income’

Question 6

Expenses

Answer 6

An expense is the cost of operations that a company incurs to generate revenue. As the popular saying goes, “it costs money to make money” Common expenses include payments to suppliers, employee wages, leases, and the equipment depreciation.

Question 7

Depreciation

Answer 7

Deprecation is an accounting method of allocating the cost of a triangle or physical asset over its useful life or life expectancy. Depreciation represents how much of an asset’s value has been used up.

Question 8

Historic Value

Answer 8

The cost of an asset when it was first purchased e.g. a Mac Book at £1400

Question 9

Expected Life

Answer 9

How long the asset is expected to be used within the business e.g. 3 years.

Question 10

The Residual Value

Answer 10

The value of the asset at the end of its expected life. How much is the asset valued at once disposed of. After 3 years the Macbook is valued at £500

Historic Value 1400 - Residual value 500 = 900

900 divided by expected life 3 years = 300 a year.