Prework Statement of Profit or Loss

Question 1

What is the statement of profit or loss?

Answer 1

• summary of the results of a business’s transactions for a period ending on the date of the statement of financial position
• summaries sales and expenses

Question 2

what is included in revenue

Answer 2

sales made for cash and sales made on credit

Question 3

How do you calculate cost of sales?

Answer 3

cost of goods available for sale at beginning of period + cost of goods brought in period (purchases) - cost of goods which weren’t cold during period (closing inventories)

Question 4

What does cost of sales mean?

Answer 4

cost of the goods actually sold during the year or period

Question 5

What is meant by gross profit? How is it calculated and what else is it known as?

Answer 5

• shows how successful the main activity of the business has been
• revenue - cost of sales= gross profit
• AKA core profit

Question 6

What is meant by net profit?

Answer 6

• shows other items of income and expenditure (mainly expenditure) which are relevant to the business but are incidental to it and not part of buying, selling or manufacturing of the goods

Question 7

What is the link between the statement of profit or loss and statement of financial position?

Answer 7

• capital in the statement of financial position increase profit/ loss
• this figure is the net profit/ loss in the statement of profit or loss