IGCSE Business Studies - Income Statements Key Terms

The financial records of a firm's transactions

• Accounts

• Gross Profit

• Cash

• Source of Finance

Gross Profit

• Cost of producing goods sold

• A professional who is responsible for keeping records of financial transactions

• Made when sales revenue is greater than cost of sales (revenue - cost of sales) Also called operating profit

• Profit left after other business overheads other than cost of sales have been paid

Cost of Sales

• Money generated from sales of goods and services

• Cash available in the bank to spend on day to day expenses

• Money paid to shareholders

• The cost of producing or buying in the goods actually sold by the business during a time period. (cost per unit * units sold)

Sales Revenue

• Profit after tax

• The income to a business during a period of time from the sales of goods and service (units sold x selling price per unit)

• How much profit is made on each item sold

• A business expenditure

Income Statement

• The part of the accounts which show calculate just money spent on production and money in from sales

• Total value of sales over a period of time e.g one year

• Money paid to shareholders as a return on their investment

• A document that records the income of a business and all costs incurred to earn that income over a period of time (e.g one year). Sometimes referred to as a profit and loss account

Accountants

• Professionally qualified people who have the responsibility of keeping accurate records and for producing the final accounts

• A production worker

• Someone who is responsible for promoting the business

• An employee responsible for generating and maximising sales

Depreciation

• The final gross profit figure

• Money invested back into the business after all payments to investors and government made

• The fall in value of a fixed asset over time

• When prices increase over time due to inflation

Retained Profit

• Also known as operating profit

• The net profit re-invested back into the company after deducting tax and payments to shareholders/owners such as dividends. Can be used as a source of finance

• Profit kept by the government

• Profit that is given to owners/shareholders

Net Profit

• The profit made by a business after all the costs have been deducted from sales revenue. It is calculated by deducting overhead costs from gross profit

• Profit reinvested back into the company and used as a source of finance

• Shows how gross profit is calculated

• The cost of buying in or actually producing the good sold during a given time period

Trading Account

• The financial record of all the expenditures of the business

• The part of the income statement that shows how much money is given to the government in taxes

• The part of the income statement that shows how the net profit is calculated

• The part of the income statement that shows how the gross profit is calculated