income statement Flashcards
(7 cards)
1
Q
what is a profit and loss account?
A
a financial statement that shows a businesses sales revenue over a period and all the relevant costs incurred
2
Q
what is cost of sales?
A
- all the costs of production used
- any direct costs, such as raw materials, wages, used in the production process
3
Q
what is the formula for cost of sales?
A
opening stock +purchases - closing sales
4
Q
what is gross profit?
A
the difference between revenue from selling the product and the direct costs of making it
5
Q
how do you calculate gross profit?
A
sales revenue - cost of sales
6
Q
what is net profit?
A
the profit that belongs to the business following the reduction of all expenses from the gross profit
7
Q
how do you calculate net profit?
A
gross profit - expenses
