Financial Statements Flashcards
(21 cards)
What is the definition of the term income statement?
Flow of sales revenue and costs over a period. It shows whether a business is making profits or losses.
What is the formula for net profit?
Gross Profit + Other Revenue/Income - Expenses
How many months is a financial year?
12 months / 1 year
What is meant by debit?
An accounting entry that increases an asset or expense account.
What is meant by credit?
An accounting entry that increases a liability or equity account.
What is meant by the term revenue?
Earnings for the sale of goods or services.
What are some examples of revenues?
- Sales revenue
- Service revenue
- Interest revenue
What is meant by cost of goods sold?
The expense a business incurred to buy or make a product for resale.
“Raw” goods for “Refined” goods. #EveOnline
What are some examples of cost of goods sold?
- Opening Inventory
- Purchase of Goods
- Closing Inventory
- Purchase Returns
- Carriage Inwards
What is meant by carriage inwards?
Costs for transporting goods purchased
What is the formula for “Cost of Goods Sold”?
Purchases - Less Inventory / Closing Inventory
What is the formula for “Gross Profit”?
Sales Revenue - Cost of Goods Sold
What are “expenses”?
Charges incurred in the course of business activities not related to the cost of goods sold.
What are some examples of expenses?
- Utilities
- Printing and Stationery
- Salaries and Wages
What are the 3 categories of expenses?
- Selling
- General and Administration
- Financial
What are the items required when needing to prepare an income statement?
- Cost of Goods Sold
- Gross Profit
- Total Expenses
- Net Profit
Like seriously in the order.
What is the formula for Cost of Goods Sold?
Purchases - Less/Closing Inventory
What is the formula for Gross Profit?
Sales Revenue - Cost of Goods Sold
What is the formula for Net Profit?
Gross Profit + Revenues - Total Expenses
Prepare the income statement
- Cost of Goods Sold
- Gross Profit
- Total Expenses
- Net Profit
What is the equation for the balance sheet?
Total Assets = Total Claims
