the income statement

Question 1

Profit and Loss Account

Answer 1

An accounting statement showing an
organisation’s sales revenue over a trading period, and
all the relevant costs incurred in earning that revenue
(income and expenditure).

Question 2

Costs of Sales

Answer 2

All costs of production used when
manufacturing. Any direct costs,
such as raw materials, wages, used in the production
process.

Question 3

Cost of Sales (Formula)

Answer 3

Opening Stock + Purchases - Closing Sales

Question 4

Gross Profit

Answer 4

The difference between the revenue from
selling the product and the direct costs of making it.

Question 5

Gross Profit (Formula)

Answer 5

Sales Revenue - Cost of Sales

Question 6

Net Profit

Answer 6

It is the profit that belongs to the sole trader
following the reduction of all expenses from the gross
profit. The sole trader has to pay income tax on this
profit.

Question 7

Net Profit (Formula)

Answer 7

Gross Profit - Expenses