What does a statement of profit or loss report over a period?
A business’s revenue and expenses, showing its financial performance to interested parties.
What is revenue?
The amount of goods or services sold.
How can a profit figure guide owners and managers?
It helps them decide how much profit to distribute or reinvest and whether operational changes are needed.
What are expenses?
Amounts incurred in purchasing or manufacturing goods and other business expenditure.
When is revenue recognized under the revenue recognition principle?
When goods or services are delivered and the amount is reliably measurable.
How is profit calculated from revenue and expenses?
In which month is revenue recognized when a product is delivered in March and paid for in April?
March.
How much gross profit did Mary make on a cooker bought for £135 and sold for £195?
£60.
What does an inventory movement account record?
Opening inventory, purchases, sales, and closing inventory.
What does profit increase in the statement of financial position?
The owner’s capital or equity.
Answer 11 questions on The Statement of Profit or Loss.
1. What does a statement of profit or loss report to show a business’s financial performance?
2. A business buys goods made by another company and resells them, while also providing repair services. Which description best fits its commercial activity?
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