Income statements Flashcards Preview

Business A2 Finance > Income statements > Flashcards

Flashcards in Income statements Deck (12):

What is an income statement?

A financial statement setting out a business' revenue,expenses and the profit or loss over a given period of time


what are the three main sections of the income statement?

Trading (calculating profit/loss)
Profit and loss (operating profit/loss)
appropriation accounts (shares the profit out e.g to shareholders)


How do you calculate gross profit?

revenue - cost of sales


How do you calculate revenue?

quality sold x selling price


how do you calculate profit for the year?

operating profit + non operating income


Why are income statements useful?

1) Allows shareholders and owners to see how the business is performing
2)enables comparisons with other similar businesses


What is operating profit?

The money a business gets to keep after all the costs have been deducted from revenue


What are cost of sales and how are they calculated?

These are variable costs e.g direct wages and raw materials
- These are deducted from sales revenue to give gross profit


What is gross profit?

This is whats left over after costs of sales has been deducted from sales revenue


what is non operating profit?

Profit you get from non trading activities e.g renting out the top of your shop


What is meant by profit quality?

The degree to which the profit figure is sustainable in the future


what is meant by profit utilisation?

The way in which profit is used e.g how its shared between shareholders