Business Comprehensive Incomes

• SALES REVENUE = PRICE X QUANTITY SOLD
• COST OF GOODS SOLD = OPENING INVENTORIES + PURCHASES – CLOSING INVENTORIES
• GROSS PROFIT = SALES REVENUE – COST OF GOODS SOLD
• PROFIT OR LOSS FOR THE YEAR = GROSS PROFIT – EXPENSES + OTHER INCOME
• . NET PROFIT The profit left after all cost have been deducted.
• EXPENSES The money spent on indirect costs, such as rent, wages, telephone & postage.
• GROSS PROFIT The amount of money left after the cost of goods sold has been deducted
• CLOSING INVENTORY The value of inventory at the end of a financial year
• OPENING INVENTORY The value of inventory in a business at the start of a financial year
• OST OF GOODS SOLD The actual value of inventory used to generate sales (direct costs)
• 2. SALES REVENUE The money coming into the business through sales
• 1. STATEMENT OF COMPREHENSIVE INCOME Shows the trading position of the business which is used to calculate gross profit. It then takes into account all other expenses to calculate the profit or loss for the year
• DEPRECIATION Accountancy concept used to spread the cost of an asset over its useful life. This gives assets a realistic value. Depreciation is an expense.
• FIXED ASSETS Assets that are not easily converted into cash, such as buildings, machinery and vehicles
• CURRENT ASSETS Assets that can be quickly turned into cash, such as stock, debtors and cash
• NON-CURRENT LIABILITIES Liabilities that will not need to be paid within one year
• . HISTORIC COST The cost of an asset when it was first purchased
• NET BOOK VALUE (NBV) The difference between the historical cost of an asset and any accumulated depreciation on that asset
• CURRENT LIABILITIES Liabilities due within one year
• CURRNET LIABILITIES Liabilities that must be settled within one year
• NET FIXED ASSETS Fixed assets less depreciation
• LONG TERM DEBT Money owed by the business but repayable within one year or more
• ACCOUNTING EQUITY Total assets minus total liabilities
• SHARE CAPITAL Money raised from selling shares in the company
• LONG-TERM LIABILITIES Liabilities due more than one year from now
• CAPITAL WORKING CAPITAL Current assets less current liabilities
• DEPRECIATION A charge against profit which reduces the value of fixed assets over time
• CAPITAL EQUITY Money invested by shareholders plus retained profits less dividends
• RETAINED PROFITS Profits kept by the business rather than being distributed to shareholders
• LONG TERM LIABILITIES Liabilities that are payable over more than one year
• CREDIT An account receivable is a liability because the customer has been supplied with goods or services but has yet to pay for them.
• FIXED ASSETS Long term assets used by businesses to generate income or profit
• CAPITAL EXPENDITURE An investment made from retained profits or borrowing
• FIXED ASSETS Long term tangible non-current assets used by the business to generate income
• HISTORIC COST The cost of an asset when it was first purchased
• 3. EXPECTED LIFE How long an asset is expected to be used within a business
• RESIDUAL VALUE The value of an asset when it is disposed of by the business, for example, resale value
• DEPRECIATION – STRAIGHT LINE Reducing the value of an asset, from the price paid, by a fixed amount each year
• DEPRECIATION – REDUCING BALANCE Reducing the value of an asset by a set percentage each year. Depreciates by a lower financial rate as the asset ages
• INVENTORY Raw materials, work in progress and finished goods