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Flashcards in Profit and loss Deck (18)
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1
Q

what is a profit and loss account?

A

used to calculate whether a business has made profit; summarises all revenue and costs over a period of time; shows banks and investors their financial health

2
Q

what does profit and loss help with?

A

it helps to forecast future profits, and helps with planning

3
Q

cost of sales

A

opening stock + purchases - closing stock = cost of sales

4
Q

gross profit

A

sales revenue - cost of sales

5
Q

total expenses

A

the sum of all the expenses

6
Q

operating/net profit

A

gross profit - total expenses

7
Q

net profit before tax

A

operating profit - interest on loans

8
Q

net profit after tax

A

net profit before tax - corporation tax

9
Q

retained profit

A

profit after tax - dividends (shareholders)

10
Q

gross profit margin

A

(gross profit / revenue) x 100

11
Q

net profit margin

A

(net profit / revenue) x 100

12
Q

what is sales revenue?

A

money coming in from sales, quantity sold x selling price

13
Q

what are costs of sales?

A

costs directly linked to the production of the goods or services sold e.g. raw materials

14
Q

what are expenses?

A

all other costs associated with the trading of the business e.g. salaries and marketing expenditure

15
Q

what is interest?

A

interest paid on debt or receive on positive balances

16
Q

what are exceptional items?

A

one off assets of income e.g. from the sale of an asset

17
Q

what is profit for the year?

A

operating profit - interest (tax is still to be deducted)

18
Q

why else are profit and loss accounts useful?

A

they can be compared to previous year’s performance; and sum up their business performance to stakeholders