Income Statements Flashcards
Revenue
The value of goods and services sold, even if they have been sold on credit and not yet paid for
Sales returns
shown below Revenue and subtracted from it
Purchases
The cost of goods that have been bought for resale. It does not include the cost of non-current assets such as machinery or vehicles
Purchase returns
shown below ‘Purchases’ and subtracted when calculating Cost of Sales
Cost of sales
The cost to the business of buying or making the goods that it has sold. It is equal to:
Opening inventory + Purchases – Purchase returns + Carriage In – Closing inventory
Gross profit
Revenue - Cost of Sales
Profit for the year
Gross profit + other income - expenses
Carriage in
The cost of transporting goods purchased by the business, and is included as part of Cost of sales’
Carriage out
The cost of transporting goods sold by the business, and is included as an expense
Discount received
Cash discount obtained from suppliers. It is added after Gross Profit when calculating Profit for the Year
Discount allowed
Cash discount given to customers. It is one of the expenses that are subtracted when calculating Profit for the Year
Depreciation
The decrease in the value of non-current assets such as machinery and vehicles. Other possible expenses include electricity, gas (or ‘Light and heat’), advertising, insurance, motor expenses, business rates and bank charges
