Unit 5: Chapter 24 Flashcards
Income statements
What are accounts?
financial records of firm transactions, they are a legal requirement for limited companies
What is an income statement?
a financial statement that record the income of a business and all costs incurred to earn that income over a period of time.
aka a profit and loss account
How can profit be increased?
increasing revenue, decreasing costs, combination of both
What is profit important?
reward for enterprise and risk taking, source of finance, indicator of success
What is the formula for revenue?
price * quantity
What is sales revenue turnover?
total revenue made by the business
What is direct cost of sales?
cost of producing/buying goods actually sold by the business
What is gross profit?
when a revenue is greater than the cost of sales, not including fixed costs
What is net profit?
final profit after expenses
What is retained profit?
net profit reinvested back into the business after deducting payments to owners, such as dividends
What is profit after tax?
retained profits + dividends
What is a debtor?
someone that owes you money
What is a creditor?
someone you owe money to
