Whole of F1 and F2 - Statement of comprehnsive income and financial position Flashcards
(49 cards)
What is Profit ?
Profit is the difference between revenue and costs
How do you calculate profit ?
Profit = Revenue - Costs
What is Gross profit ?
Gross profit is the amount made just from selling goods and does not take into account the operating costs of the business
What expenses may a business have ?
Wages and Salaries
Rent
Advertising
Paying bills - Electricity
Interest
Overdraft
What does the statement of comprehensive income or profit and loss statement show ?
It shows how much profit or loss a business has made over a specified time period - usually for a year
What is the definition for sales ?
It is the total amount of money received from selling the goods or service
what is the definition of cost of sales ?
This is how much it costs the business to buy the stock or raw materials . It may be called cost of goods sold.
What is the definition of gross profit ?
This is how much profit is made from the manufacturing or selling process . This is the profit before the running expenses are deducted.
How do you calculate gross profit ?
Gross profit = sales - cost of sales
What are expenses ?
These are the running expenses of a business such as rent , wages and telephone . These are also called overheads
What is net profit ?
This is how much profit or loss the business has made after all the expenses have been deducted.
How do you calculate net profit ?
Net profit = Gross Profit - Expenses
How do you calculate the cost of sales ?
Cost of sales = Opening inventory + Purchases - Closing Inventory
What are accruals ?
Accruals are amounts owed by a business for services it has used during an accounting period but has not yet paid for.
What is Accruals in simple meaning
Accruals are expenses that are still owing.
What are examples of accruals?
Electricity that has been out but not paid for yet
Wages of workers still owed
Rent still owed
What is a prepayment ?
It is when an expense is paid in advance of the periods to which it relates.
What is an example of a pre-payement ?
A business might pay a whole years insurance premium for a delivery van on the 1st April of £1200
What is the full definition of prepayments ?
They are expenses paid in advance so they should be deducted from the expense in the statement of financial income.
What is the summary of Accruals ?
Accruals is amounts owning . They should be added to the expense figure . They are included as a current liability in the statement of financial position
what is the summary of Prepayments ?
These are amounts paid in advance . These should be deducted from the expense figure and included as a current asset in the statement of financial position
What does the straight line method Involve ?
It involves reducing the value of an asset based on its cost. You will be given a percentage to use.
What is the equation for the straight line method ?
Deprecation per year ( Straight line method) = Percentage x cost of the asset
What does the reducing balance method involve ?
It involves reducing the value of an asset based on its net book value
