IB Business 3.4 - Profit Loss Account - Final Accounts

Sales Revenue

The money an organization earns from selling goods and services.

Costs of sales (COS)

The direct costs of production, such as the cost of raw materials, component parts, and direct labour.

Gross profits

Refers to the profit from a firm’s everyday trading activities

Gross profits formula

Sales revenue – Cost of sales

Cost of sales formula

Opening stock + Purchases – Closing stock.

Expenses

Are a firm’s indirect costs of production. Rent, management salaries, marketing campaigns, accountancy fees, bank interest charges.

Profit before interest and tax

Value of a firm’s profit before deducting interest payments on loans and taxes on profits.

Profit for the period

Shows the actual value of profit earned by the business after all costs have been accounted for, i.e., profit after interest and tax.

Tax

Refers to the compulsory deductions paid to the government as a proportion of a firm’s profits.

Dividends

The payments from a company’s profit (after interest and tax) paid to the shareholders (owners) of the company.

Retained Profits

Any funds left over from profits (after interest and tax) that are not paid to shareholders is kept within the business for its own use.