Income Statement Flashcards
Profit =
Income - Expenses
Assets =
Equity + Profit + Liabilities
Equity + (Sales revenue-expenses) + Liabilities
Income statement concerned with
the flow of wealth over a period of time
Sales revenue - cost of sales =
Gross profit
Gross profit - operating expenses =
Operating profit
Operating profit - interest payable + interest receivable =
Profit for the period
Gross profit =
Sales revenue - cost of sales
Operating profit =
Gross profit - operating expenses
Profit for the period =
Operating profit - interest payable + interest receivable
What is the matching principle?
Expenses should be matched to the revenue that they helped to generate
e.g. truck depreciated over years included in income statement as expenses
Accurals
States that all income and expenses incurred in an accounting period should be recognized in that accounting period
Profit is not
CASH
Cost of goods sold/sales =
Opening inventory + purchases – closing inventory
Sales Revenue/ turnover is the
Trading income arising from services provided and/or goods sold during a period of time
Operating expenses
Transport Advertising and retail expenses Rent Depreciation Salaries and Wages Other administrative expenses
