Classification
Wages paid to shop staff
What is an Expense?
The basic formula to find Net Profit
What is Total Revenue - Total Expenses?
The very first line item/heading at the top of an Income Statement.
What is Sales Revenue?
True or False: Cash in the business bank account goes on the Income Statement.
What is False? (It is an Asset on the Balance Sheet)
The term for the total value of stock sold to customers during the period, valued at its original purchase cost to the business.
What is Cost of Goods Sold (or Cost of Sales)?
TRIPLE POINTS: Money borrowed from the bank via a 5-year loan.
What is Neither? (It's a Liability)
The formula used to calculate Gross Profit
What is Sales Revenue minus Cost of Goods Sold (COGS)?
The section where you would find "Advertising" and "Delivery Van Fuel".
What are Selling and Distribution Expenses?
The reason why "Buying a new Delivery Truck for $30,000" is not listed as an expense on the Income Statement.
What is because it's a Non-Current Asset? (Only its depreciation goes to the Income Statement)
The non-cash operating expense that records how much value a non-current asset (like equipment or a vehicle) has lost during the financial year.
What is Depreciation Expense?
Fees earned by providing a service to a customer.
What is Revenue?
If Sales Revenue is $100,000 and Gross Profit is $60,000, this is the Cost of Goods Sold.
What is $40,000?
The section where you would place "Office Stationery" and "Manager Salaries".
What are Administrative/General Expenses?
If a business pays $12,000 for rent, but $2,000 of it is a prepayment for next year, this is the amount recorded on this year's Income Statement.
What is $10,000? (Accrual accounting principle)
The name given to the final figure at the bottom of the Income Statement when total expenses are actually higher than total revenue.
What is a Net Loss?
Cash drawn from the business by the owner for personal use (Drawings).
What is Neither? (It reduces Equity on the Balance Sheet)
If Gross Profit is $45,000, Operating Expenses are $50,000, and Other Income is $10,000, this is the Net Profit.
What is $5,000? ($45,000 + $10,000 - $50,000)
DOUBLE POINTS: The specific section where "Interest on Bank Loan" is classified.
What are Finance Costs/Expenses?
This item is found on the Trial Balance, represents money customers owe us, and is often confused with Revenue but belongs on the Balance Sheet.
What are Accounts Receivable (or Debtors)?
DOUBLE POINTS: The definition of Gross Profit.
What is the profit made directly from buying and selling goods, before accounting for overhead expenses?
Discount Received from a supplier for paying our bill early.
What is Revenue? (Other Income)
DOUBLE POINTS: The formula to calculate the Cost of Goods Sold using Opening Stock, Purchases, and Closing Stock.
What is Opening Stock + Purchases - Closing Stock?
This is where "Rent Received" from subletting an extra office room is listed.
What is Other Income?
At the end of the year, a business owes $500 for electricity that hasn't been invoiced or paid yet. This is what you must do to the Electricity Expense on the Income Statement.
What is add it to the expense? (Accrued Expense)
The difference between a "Gross Profit" and a "Net Profit".
What is: Gross Profit only subtracts the direct cost of stock, while Net Profit subtracts all other operating expenses and adds other income?