income statements

Question 1

what is ‘SALES REVENUE’?

Answer 1

sales that a business has received throughout the year by selling to customers

Question 2

what is ‘COST OF SALES’?

Answer 2

the cost of producing a product or buying a product in to sell onto customers

Question 3

what is ‘GROSS PROFIT’?

Answer 3

the profit made from buying and selling goods

Question 4

what are ‘EXPENSES’?

Answer 4

items that a business must pay for to keep running, e.g. electricity, wages, loan repayments

Question 5

what is ‘PROFIT/LOSS FOR THE YEAR’?

Answer 5

the profit made once expenses have been subtracted. Note that if a business has made a loss then the figure will be shown in brackets e.g. (5,000)

Question 6

what is the formula for calculating gross profit?

Answer 6

Gross Profit = Sales Revenue - Cost of Sales

Question 7

what is the formula for calculating profit/loss for the year?

Answer 7

Profit/Loss for the year = Gross Profit - Expenses

Question 8

what is an ‘income statement’?

Answer 8

An income statement shows the income and expenditure, and the profit/loss made by a business though the year.

Question 9

what is total revenue?

Answer 9

the money that a business makes from selling it’s goods and services.