Unit 40: Profit and loss account

accruals principle / accruals method

accounting where expenses and revenues are booked in the period in which they are occurring. Not when money is actually received or paid out, which may happen in a later period.

reporting period

time in which financial performance is measured (e.g., quarterly).

profit and loss (P&L)

a summary of profits and losses during a period

profit

money made (income > expenses).

loss

money lost (expenses > income).

sales

revenue from selling goods or services

cost of goods sold (COGS)

direct costs of producing goods

labour costs

employee salary costs

general expenses

ongoing business costs like rent or admin

depreciation

shown in the accounts to allow for the way that equipment wears out and declines in value over time and will have to be replaced

operating profit

profit from core business activities

interest payable

interest owed on borrowed money in the form of bonds and bank loans

profit on ordinary activities before tax / pre-tax profit

profit before taxes are deducted

exceptional items

unusual, one-time income or costs

corporation tax

tax on company profits

turnover

British English term for sales/revenue.

income statement

US term for profit and loss account

profit after tax

earnings

dividends

profit paid out to shareholders

dividends pre share

amount of profit per share

pass / omit / skip the dividend

not paying a dividend. they occur in this order of frequency, there is no difference in meaning.

retained earnings

profit kept in the company to invest in future activities.

earnings per share (EPS)

profit divided by number of shares.

retained

held back / not spent or paid out / kept by the company and not paid out in dividends.