Understanding the income statement Flashcards
What is revenue?
The value of goods and services sold
Does revenue include credit sales which have not been paid for yet?
Yes
Where are sales returns shown below?
Below revenue
Are sales returns added or subtracted from revenue?
Subtracted
What are purchases
They are the cost of goods that have been bought for resale
Where are returns out shown below?
Below purchases
Are returns out added or subtracted from purchases
Subtracted
What is cost of sales?
It is the cost to the business of buying or making the goods that it has sold
Cost of sales =
Opening inventory + purchases - purchase returns + Carriage in - Closing inventory
Gross Profit =
Revenue - Cost of sales
Profit for the year =
Gross profit + Other income - Expenses
What is carriage in?
It is the cost of transporting goods purchased by the business
What is carriage out?
The cost of transporting goods sold by the business.
What is discount received?
It is the cash discount obtained from suppliers
What is discount allowed?
It is cash discount given to customers.
