Week 4- Statement of Profit or Loss Flashcards
Where does profit or loss go for each type of business?
- Sole proprietor- capital account will increase
- LTD- Retained earnings will increase
what is the basic format of a SoPL
Income –> minus expenses –> profit for the year
if the firm is a trading or manufacturing business how is income analysed further?
Income—> Minus Cost of sales—>equals gross profit—>minus operating expenses —> equals operating profit for the year
what are cost of sales?
what it costs to bring the item to the location and condition where it is ready for the purpose for which it is intended
how do you calculate cost of sales?
Opening inventory( stock at the start of the year)+ Purchases ( stock added during the year) = cost of goods available for sale
cost of goods available for sale - closing stock (stock at the end of the year)= cost of sales
what is the definition of income?
Increases in assets that result in increases in equity
What is the definition of expenses?
decreases in assets that result in decreases in equity
Are products bought/sold at a discounted price recorded on the statement of profit or loss at the discounted price or their original price?
Discounted price
what is the result of a sales return?
Decrease the net sales figure
what is the result of a purchase return?
decrease in the net purchases
will profit always be carried over to the next year?
No, often the business will distribute the profits between the shareholders
Is a SoPL titled ‘as at’ or ‘for the year ended’
for the year ended
what is exceptional income?
the income gained from selling something the business wouldn’t sell regularly eg. their shop
what are admin costs?
all the costs of running the business that do not fall under any other heading
