Lecture Notes Flashcards

Vocabulary flashcards based on lecture notes about income statements and profit & loss accounting.

Final Accounts

Published accounts of an organization, available to stakeholders like managers, employees, shareholders, sponsors, financiers, and investors.

Management Accounting

Financial accounts created for internal and confidential purposes.

Profit and Loss Account

Also known as the income statement, it is a component of the final accounts.

Balance Sheet

A component of the final accounts.

Profit

Revenue minus the cost of making the products. It's a surplus remaining after costs are subtracted.

Loss

Occurs when costs exceed revenue.

Insolvent

A business that cannot meet its short-term debts when they fall due.

Sales Revenue (Sales Turnover)

Money an organization earns from selling goods and services.

Costs of Goods Sold (COGS)

Direct costs of production, such as raw materials, component parts, and direct labor.

Gross Profit

Difference between revenue and costs of goods sold (COGS). Calculated before fixed costs are considered.

Expenses

Business's indirect costs of production, e.g., rent, management salaries, marketing campaigns, etc.

Net Profit Before Interest and Tax

Business's profit (or loss) before deducting interest payments and taxes.

Tax

Compulsory deduction paid to the government as a proportion of a business’s profit.

Net Profit After Interest and Tax

Actual value of profit earned, after all costs are accounted for. Belongs to the owners of the business.

Dividends

Payments from a business’s net profit after interest and tax paid to the shareholders (owners).

Retained Profit

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