Profit & Loss Account - The Basics

Revision of the introductory theory to the Profit & Loss Account.

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What is Sales Revenue?
a.k.a. Sales turnover, income from sales. This is the money the business receives from customers in exchange for products/services.
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How is the Sales Revenue calculated?
Number of Items Sold x Selling Price. (SR = NIS x SP)
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What is the Cost of Sales?
This is the costs the business incurs in order to make the products to sell.
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How is the Cost of Sales calculated
Opening Stock + Purchases – Closing Stock (CoS = OS + P - CS)
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What is Gross Profit?
The Gross Profit is profit from sales once the cost of sales has been deducted.
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How is Gross Profit calculated?
Sales Revenue – Cost of Sales (GP = SR – CoS)
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What are expenses (a.k.a overheads)?
Expenses are the ‘running costs’ a business has in order to make and sell the product. This commonly includes expenses such as wages and salaries; rents, rates and insurance; Light, heat and power; telephone and broadband.
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How is Total Expenses calculated?
By adding all the given expenses together. (E+E+E+E=TE)
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What is Net Profit?
Net Profit is the profit once the expenses have been deducted.
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How is Net Profit calculated?
Gross Profit – Total Expenses. (NP = GP – TE)
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Other cards in this set

Card 2

Front

How is the Sales Revenue calculated?

Back

Number of Items Sold x Selling Price. (SR = NIS x SP)

Card 3

Front

What is the Cost of Sales?

Back

Preview of the front of card 3

Card 4

Front

How is the Cost of Sales calculated

Back

Preview of the front of card 4

Card 5

Front

What is Gross Profit?

Back

Preview of the front of card 5
View more cards

Comments

davidsalter

This set of 12 flash cards covers the most important terms used in the profit and loss account. They can be used for testing or learning.

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