TOPIC 3.4: Financial Documents
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29 Terms
A Statement of Comprehensive Income shows:
A financial document that shows whether a business has made a profit or loss over a period of time.
Main features:
Revenue/Sales
Cost of Sales
Gross Profit
Other Operating Expenses
Operating Profit
Finance Costs
Profit for the Year
What is gross profit?
Revenue - Cost of Sales
What is included in "cost of sales"?
Direct costs of producing goods sold (e.g., raw materials)
Other operating expenses include:
Rent, insurance, and advertising
Operating profit is calculated as:
Gross Profit - Other Operating Expenses
What are finance costs?
Interest paid on loans
A Statement of Financial Position shows:
What a business owns and owes at a specific point in time
Non-current assets are:
Assets held for more than one year
Which of the following is a non-current asset?
Property and buildings
Current assets are:
Assets held for less than one year
Which of the following is a current asset?
Inventory
Non-current liabilities are:
Debts due after more than one year
Which of the following is a non-current liability?
Long-term bank loan
Current liabilities are:
Debts due within one year
The accounting equation is:
-
Total Assets = Total Liabilities + Equity
A ____________________ ____________________ ____________________ shows whether a business has made a profit or loss over a period of time.
Statement of Comprehensive Income
____________________ ____________________ is calculated as Revenue - Cost of Sales.
Gross profit
____________________ profit is calculated as Gross Profit - Other Operating Expenses.
Operating
Interest paid on loans is shown as ____________________ costs on the Statement of Comprehensive Income.
Finance
A ____________________ ____________________ ____________________ shows what a business owns and owes at a specific point in time.
Statement of Financial Position
What is the purpose of a Statement of Comprehensive Income?
To show whether a business has made a profit or loss over a period of time.
Main features: Revenue, Cost of Sales, Gross Profit, Other Operating Expenses, Operating Profit, Finance Costs, Profit for the Year
Why is profit important to a business?
Reward for risk taken
- Can be reinvested (retained profit)
- Attracts investors
- Indicator of success
- Without profit, the business will fail
What is operating profit?
Gross Profit - Other Operating Expenses
What is a Statement of Financial Position?
A financial document that shows what a business owns and owes at a specific point in time.
Main features:
Non-current assets (held more than one year)
Current assets (held less than one year)
Non-current liabilities (due after more than one year)
Current liabilities (due within one year)
Equity (share capital + retained profit)
What is the accounting equation?
Total Assets = Total Liabilities + Equity
Why is profit important?
Reward for risk taken
Can be reinvested (retained profit)
Attracts investors
Indicator of success
Without profit, the business will fail
Gross profit = Revenue - ____________________ ____________________ ____________________.
Cost of sales
Operating profit = Gross Profit - ____________________ ____________________ ____________________.
Other operating expenses
Assets held for more than one year are called - assets.
Non - current