Carefully classified payments can be seen and from this and you can look at the company’s performance and make better, informed decisions. (Sue Friary, Darlington College) Income Statement Otherwise known as a Profit and Loss account, this shows the profitability and performance of a business during an accounting period. (Sue Friary, Darlington College) “The income statement of a business calculates the profit due to the owner/owners of the business after the cost of purchases and other expenses have been deducted from sales revenue.
David Cox(2010). Peg 9. INCOME minus EXPENSES Egg sales Revenue equals PROFIT egg running which adds costs to capital Statement of Financial Position Otherwise known as a balance sheet, this shows what the business is worth (in terms of assets, liabilities and capital) at the end of an accounting period. (Sue friary, Darlington College) “The statement of financial position is so called because it shows the assets, liabilities and capital of a business in numerical (money) terms:” David Cox (2010). Peg 9.
ASSETS minus LIABILITIES equals CAPITAL what a easiness owes how the business has been financed Fixed Costs Fixed costs are also known as non-current assets, such as rent on premises, rates, machinery, vehicles and office equipment. These are expenses that don’t change with output, so regardless of the amount of bottles of water you sell; these costs will always remain the same. (Sue friary, Darlington College) ‘When a business buys non-current assets, the expenditure is referred to as capital expenditure.
This means that items have been bought for use in the business for some years to come. By contrast, revenue expenditure is where the items bought will be used by the business quite quickly. For example, the purchase of a car is capital expenditure, whilst the cost of repair of the car is revenue expenditure. ” David Cox (2010). Peg 18. Variable Costs Variable costs varied with output, cost per unit stays the same but the total variable cost will increase with output. Sue Friary, Darlington College 2013) “Total variable costs change in direct proportion to changes in activity level. Examples are costs of direct materials, which vary proportionally with the number of units reduced and sales commissions which vary proportionally with sales volumes. ” Earl K. Stick, James D. Stick, Monte R. Swain, Ph. D (2008). Accounting: Concepts & Applications. 11th De. USA: Coinage Learning. 1062. Semi variable “A semi- variable cost is one that varies to some extent with the level of business activity; it has both fixed and variable elements.