revision 3

formula for gross profit

revenue - cost of sales =

operating profit formula

gross profit - operating expenses =

profit for the period

operating profit + non-operating income - finance expenses =

costs of sales

opening inventory + purchases - closing inventory

gross profit definition

is the profit a company makes after deducting costs of making and selling its products or the costs of irs services.

operating profit definition

is the profit made after paying all business costs (operating expenses: expenses for day-to-day running of the business), but before paying tax and any other income or expenses such as interest. Profit generated from normal activities of the business e.g. electricity and depreciation/amortisation expenses

factors for calculating a depreciation expense

-The cost (or fair value) of the asset?

-The useful life of the asset?

-Residual value (disposal value)?

-Depreciation method?

accumulated depreciation definition:

-The total depreciation that has been charged on an asset since it was acquired.

Net Book Value

-Is the current value of the non-current asset.

-Calculated as the Cost – Accumulated depreciation =

straight line method formula

(Asset cost – Residual value) / Useful life of the asset

loss of the period formula

total revenue for the period - total expenses incurred in generating that revenue

payable days

= trade payable / cost of sale x 365