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Unit 21: Income Statements
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Total costs
costs of sales and expenses
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Income statement
financial statement of revenue, costs and profits for a given period of time. Usually 1 financial year
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Revenue
Total money earned by the sale of products
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Why is it important for private businesses to know how much profit they make?
Measure success, measure the manager's performance, deciding which products to sell
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Gross profits
revenue minus the cost of sales
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Costs of sales
the cost of the resources needed to produce the items being sold ~direct costs
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Why is it important for private businesses to know how much profit they make? (5 reasons)
Measure success / measure the manager's performance / deciding which products to sell / finance business expansion / attract investors
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Why does the government care about income statements?
Because taxes are calculated depending on profit
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Why do suppliers care about income statements?
Because they want to know if the company will continue to purchase materials and other suppliers.
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Profits
the difference between revenue and total costs
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Expenses
day-to-day operating expenses of a business
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