The statement of profit and loss Flashcards
trial balance
a list of balances in the ledger
What are the financial statements
statement of profit or loss
statement of financial position
cash flow statement
statement of changes in equity
what does statement of profit or loss provide?
information about a performance over a period of time looking at only income/revenue and expenses
Types of expenses
cost of sales (clothes etc)
distribution costs (postage,packaging)
finance costs (bank interest)
tax expense (corporation tax)
administrative expenses (wages, salaries, insurance)
gross profit formula
revenue -cost of sales (costs of goods sold)
What does the statement of profit or loss look like
Revenue
cost of sales
impairment losses
gross profit
all costs
other losses/gains
trading profit
share of associates and joint ventures
operating profits
finance income
finance costs
profit before tax
tax
profit for the year
other name for operating profit
profit before ebit (interest and tax)
what concept must be applied when doing profit and loss statements
accurual principle is very important (revenue when earnt expenses when incurred)
what’s finance costs the same as?
interest expense
steps for profit and loss statement
- find the start and end date (for accurual)
- ignore how cash is accounted for we only look at accuruals
- find inventory
4 workout cost of sales (opening inventory + purchases - closing inventory
what’s revenue the same as?
sales
turnover
cost of sale formula
opening inventory + purchases - closing inventory
what’s the difference between accumulated depreciation and depreciation expense?
depreciation expense is the cost of the asset for the financial year depreciation accumulated is not the expense as it’s over many years
straight line method
cost of asset - residual value
percentage x cost
Reducing balance method
percentage x (cost-accumulated depreciation)
what’s a prepayment transaction?
payment made in the financial year that goes beyond your financial year
prepayment formula
amount of months prepaid/total financial year months x payment paid
what is bad debt?
a person who owes you goes into administration and can no longer pay (unrecoverable debt)
what is preudence?
conservatism
what goes down when there’s bad debts?
trade receivables
how do you work out trade receivables after bad debt!
trade receivables - bad debts
to find provision take the answer and do the percentage of what the answer was i
what happens when the provision for the bad debts is higher or less than the original
higher = expense
stay same = gain
what is provision for doubtful debts
making sure your conservative by only account a proportion not the whole thing
