bst topic 2 income statement cash flow statement balance sheet

Profit/Loss Formula

Revenue-Expenses

Gross profit/loss Formula

Revenue-COGS

Net Profit Formula

Gross Profit - Expenses

COGS (Cost of Goods Sold) Formula

Opening stock + Purchases - Closing stock

What are expenses? Give examples.

Expenses are costs incurred in running the business. Examples include wages and salaries, purchases of new materials, rent, electricity and telephones.

What is an income statement?

A financial statement— revenue, expenses, gains, and losses during a set accounting period. It provides valuable insights into various aspects of a business, including its overall profitability and earnings per share.

What is a cash flow statement?

A financial statement that indicates the movement of cash receipts (outflows) and cash payments (inflows) resulting from transactions over a period of time. This shows the business' liquidity (adequate cash flow or not)

What is a balance sheet?

A statement of financial position that shows the financial position of a business at a particular time. It shows assets,

What does a balance sheet consist of?

Assets• Liabilities• Owners Equity

What are assets?

Things that a business owns e.g. equipment, motor vehicles, stock at hand, account receivable/debtors

What are liabilities?

Things that a business owes e.g. accounts payable (owes to suppliers), mortgages, bank loans

What are current assets/liabilities?

Refers to a time period of up to one year by this time the asset should be converted to cash; or the liability should be paid

What is Owner's Equity

Amount of money owners have put into their business (Capital contribution) OR Profits which they keep in the business (Retained Profits)

What are non-current assets/liabilities

Refers to a time period of over a year

What is the accounting equation?

Assets = Liabilities + Owner's Equity (ALOE)

What are the TWO sources of finance to purchase assets?

Equity and Debt Finance. Equity--what the owner puts in. Debt--loans