Profit and Loss Accounts

• What is the formula for Gross Profit?

  Gross Profit = Sales Revenue – Costs of Sales

  
• If Sales Revenue is £1106540 and Costs of Sales are £449500, what is the Gross Profit?

  £657040
• By what percentage did marketing expenditure increase compared to the previous year?

  75%
• If the previous marketing expenditure was £3000, what is the new marketing expenditure after a 75% increase?

  £5250
• What is the formula to calculate Total Expenses?

  Add up all the expenses!
• If Total Expenses amount to £555710, what is the Net Profit if Gross Profit is £101330?

  £101330
• What do profitability ratios measure?

  They measure total profit against resources used
• Why is profit considered a relatively meaningless figure on its own?

  It needs comparison against figures like turnover
• What is a Profit and Loss Account?

  • An accounting statement
  • Shows sales revenue over a trading period
  • Lists relevant costs incurred in earning that revenue
• What is the first line in a Profit and Loss Account?

  Sales Revenue
• What is the last line in a Profit and Loss Account?

  Net Profit
• What are the direct costs included in Cost of Sales?

  Raw materials and wages used in production
• How is Gross Profit defined?

  Difference between revenue and direct costs of making it
• What is Net Profit?

  Profit after all expenses are deducted from gross profit
• What must a sole trader pay on Net Profit?

  Income tax
• What are the formulas related to Profit and Loss Accounts?

  1. Opening stock + Purchases - Closing Sales
  2. Sales Revenue - Costs of Sales
  3. Gross Profit - Expenses

  
• What does Gross Profit % measure?

  Proportion of money left after cost of goods sold
• If the gross profit margin is 30%, what percentage are the cost of sales?

  70%
• What are reasons for changes in Gross Profit %?

  Changes in sales turnover and cost of goods sold
• What does Net Profit % measure?

  How much of every pound is kept in earnings
• What are reasons for changes in Net Profit %?

  Changes in sales turnover, cost of goods sold, and expenses