Profit and Loss Accounts

Charlotte Summerly
Flashcards by Charlotte Summerly, updated more than 1 year ago
Charlotte Summerly
Created by Charlotte Summerly about 5 years ago
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AS - Level Business Studies (Theme 2) Flashcards on Profit and Loss Accounts, created by Charlotte Summerly on 03/07/2016.

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Question Answer
What is profit and how does it differ from cash? Cash is physical Profit is long term
What is profit? Total revenue - total costs
Types of profit Gross profit Operating profit Net profit
Gross profit Revenue - variable costs Gross profit refers to profit made after fixed/direct costs are met
Operating profit gross profit - overheads
Net profit operating profit - interest and exceptional costs Net profit could be calculated before and after subtraction of taxes
What is profit and loss account? - aka statement of comprehensive income - financial performance of past 12 months - seen in business plan - comparisons can be made
Profit and loss account and cash flow forecast The difference between this and a CFF is simply the detail in document for instance tax is often considered and profits are calculated
Why is it a good idea to calculate profit/loss? - shows financial health - avoid failure - record of incomes - compare trades - legal requirement - LTD are required to publish this account - can look at how to generate higher profits
Calculate profit and loss accounts Percentage changes in profit = (current years profit - previous years profit / previous years profit) x 100
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