Statement of Profit or Loss Flashcards
what does the statement of profit ot loss show
an entities incomes and expenditure for the whole financial year
define income
thr revenue earned during the financial year
define expenditure
the expenses incurred during the financial year
what can sopl also be called
consolidated income statement
the profit and loss account
define revenue
income made from sales made in ordinary course of business
what is gross profit
revenue - cost of sales
what is operating profit
gross profit - distribution and selling costs - administration expenses
what is profit before tax
operating profit + finance income - finance expense
what is finance expense
interest payable eg on loans
what is finance income
interest receivable eg on loans given out, dividends from other companies
how to calculate profit for the year
profit before tax - income tax
what are examples of operating expenses
distribution and selling costs
admin costs
if the gross profit is much larger than the operating ptofit what might the business look into
reducing their operating costs
define income
increases in assets or decreases in liabilities that result in an increase in equity
if cash increases by 100 euros from a sale is this an income
yes as assets will increase and equity will increase by profit made
if trade receivables increases by 100 euro frpm a sale made on credit is this an income
yes as assets will increase and equity will increase by profit made
if a loan of 100 euro is taken out does this count as income
no as assets increases but liabilities also does
no change on equity
define expense
decrease in assets or increase in liabilities that result in a decrease in equty
why is a new loan not considered an expense
no impact on equity
increased liabilities and increased assets only
is paying a trade payable expenditure
decrease in assets and decrease in liabilities but no change on equity
so no
are dividends an expense
distribution of equity
not in normal course of business. so no
what is revenue also referred to as
sales or turnover
other sources of income than revenue
finance income
profits on the sale of non current assets
types of expenditure
cost of sales
distribution and selling costs
administration costs
finance expenses
income tax
losses on the sale of non current assets
