Discover Accounting Definitions III

Lately we just completed the discovering of balance sheet , our vision will converse to other side important more than one time
we Accountants called it Income statement . In recent times we post in two accounts to obtain the Net income exhibited as
the Trade account give us the gross profit and the Profit and loss account with using gross profit give us the Net income .
But now this technique of posting was configured as shown here :

- Accounting period :
The period that under the examination or the period that I gained the net income in usually a year .

- Sales :
the income receivable during the Accounting period , It's the value of goods and services that we represented during the period

- Cost of Sales :
It's the price we spend to get goods and services we calculate as :

* Opening stock which is the value of goods in the begining of Accounting period .
* Plus purchases of goods .
* Less Closing stock, which is the value of stock which exists at the end of the accounting period .

after this calculation less the result from the sales to get the gross profit .

- Gross profit :
Is the total of profit in the year later the trade account help us to result it .

- Expenses : It represent the expenditure including many examples :

* advertising
* rent and rates
* wages and salaries
* travelling expenses
* light and heat
* Office Expenses
* Miscellaneous Expenses
* bank interest
* loan interest
* Depreciation
* Provision for doubtful debts
* bad debts written off
and so on .

- Net profit :
Sales less Cost of sales result gross profit
Gross profit less expenses result Net profit

In other hand as we said in the past they used the Accounts not this statement as shown here :

- Trade Accounts :
Shows what Gross Profit the business has made within an accounting period It comes on top of the Profit and Loss Account .

- Profit and loss Account :
Shows what net profit or loss the business has made within an accounting period after deducting all expenditure from the income.
a net profit is earned if total expenditure is less than the sales figure. A net loss is made if it is greater. Comes underneath the Trading Account

Best hopes ,
Mostafa