Business - 5.3

Question 1

accounts - definition

Answer 1

financial record of a firm’s transaction

Question 2

final accounts - definition

Answer 2

produced at the end of the financial year give details of the profit or loss made over the year and the worth of the business

Question 3

profit - formula

Answer 3

revenue - cost of making products

Question 4

how to increase profit

Answer 4

1. increasing revenue by more than costs
2. reducing the cost of making products
3. combinations of 1 + 2

Question 5

why is profit important

Answer 5

• reward for enterprise
• reward for risk taking
• source of finance
• indicator of success

Question 6

income statement - definition

Answer 6

• records the income of all business and all costs that earn income
• also known as a profit / loss account

Question 7

cost of sales - definition

Answer 7

• the cost of producing goods to be sold

Question 8

gross profit - definition

Answer 8

• when revenue is greater than the cost of sales

Question 9

gross profit - formula

Answer 9

revenue - cost of sales

Question 10

net profit - definition

Answer 10

profit made by a business after all costs have been deducted from revenue

Question 11

net profit - formula

Answer 11

gross profit - overhead costs

Question 12

depreciation - definition

Answer 12

fall in a value of a fixed asset over time

Question 13

retained profits - definition

Answer 13

net profit reinvested back into the company after deducting tax & payments to owners (eg dividends)

Question 14

income statement - purpose

Answer 14

1. legal requirements
2. managers - helps decision making and control costs
3. investors - shows profitability
4. banks - checks before approving loans
5. track performance - comparing by each year