● define cost of sales – the cost of producing a product
● define gross profit – the money made from selling a product (revenue) after the cost of producing the product (cost of sales) has been deducted
● calculate gross profit (formula will not be given in the assessment)
● explain the impact of positive and negative gross profit on businesses
● define net profit – the money made from selling a product after all costs (expenditure) have been deducted (formula will not be given in the assessment)
● calculate net profit
● explain the impact of positive and negative net profit on businesses
Measuring success by looking at financial statements – learners should:
● understand what financial statements are – documents that record the financial activities of a business, sometimes required by law, including income statement
(profit and loss account) and statement of financial position (balance sheet)
Income statement (profit and loss account) – learners should:
● identify the purpose of a income statement (profit and loss account) – to show how the business performed financially over a period of time (usually one year)
● complete an income statement (profit and loss account) from given figures,
including:
o trading account (top section of the income statement) – includes figures for
revenue (turnover) and cost of sales and calculates the amount of gross profit
o expenses/overheads (bottom section of the income statement)
o calculating net profit
Statement of financial position (balance sheet) – learners should:
● identify the purpose of a statement of financial position (balance sheet) – to show the financial position of a business at a point in time
● understand the format of a statement of financial position (balance sheet)
● categorise total assets and liabilities using a statement of financial position
(balance sheet)
● understand that a statement of financial position (balance sheet) shows at a point in
time:
o how a business is funded (capital)
o how a business is using these funds (net assets)
● complete a statement of financial position (balance sheet) with given figures for a
small business (such as a sole trader or partnership), identifying:
o net assets – what the business owns, or is owed (debtors/trade receivables),
including fixed assets and short-term assets
o liabilities – what the business owes to others (creditors/trade payables), including
current liabilities and long-term liabilities
o capital – how the business is funded (money invested in the business to generate
revenue) from:
– internal sources – money from shareholders (share capital) or retained profits
– external sources – bank loans or other forms of finance that have to be repaid
o working capital – the amount of capital used to run day-to-day activities (current
assets minus current liabilities): if this figure is negative, the business may have
problems financing its day-to-day activities
● define gross profit – the money made from selling a product (revenue) after the cost of producing the product (cost of sales) has been deducted
● calculate gross profit (formula will not be given in the assessment)
● explain the impact of positive and negative gross profit on businesses
● define net profit – the money made from selling a product after all costs (expenditure) have been deducted (formula will not be given in the assessment)
● calculate net profit
● explain the impact of positive and negative net profit on businesses
Measuring success by looking at financial statements – learners should:
● understand what financial statements are – documents that record the financial activities of a business, sometimes required by law, including income statement
(profit and loss account) and statement of financial position (balance sheet)
Income statement (profit and loss account) – learners should:
● identify the purpose of a income statement (profit and loss account) – to show how the business performed financially over a period of time (usually one year)
● complete an income statement (profit and loss account) from given figures,
including:
o trading account (top section of the income statement) – includes figures for
revenue (turnover) and cost of sales and calculates the amount of gross profit
o expenses/overheads (bottom section of the income statement)
o calculating net profit
Statement of financial position (balance sheet) – learners should:
● identify the purpose of a statement of financial position (balance sheet) – to show the financial position of a business at a point in time
● understand the format of a statement of financial position (balance sheet)
● categorise total assets and liabilities using a statement of financial position
(balance sheet)
● understand that a statement of financial position (balance sheet) shows at a point in
time:
o how a business is funded (capital)
o how a business is using these funds (net assets)
● complete a statement of financial position (balance sheet) with given figures for a
small business (such as a sole trader or partnership), identifying:
o net assets – what the business owns, or is owed (debtors/trade receivables),
including fixed assets and short-term assets
o liabilities – what the business owes to others (creditors/trade payables), including
current liabilities and long-term liabilities
o capital – how the business is funded (money invested in the business to generate
revenue) from:
– internal sources – money from shareholders (share capital) or retained profits
– external sources – bank loans or other forms of finance that have to be repaid
o working capital – the amount of capital used to run day-to-day activities (current
assets minus current liabilities): if this figure is negative, the business may have
problems financing its day-to-day activities
Cost of sales
Cost of sales: refers to the money that it costs to make an item
You will need to know the cost of sales to work out gross profit |
Jamie makes 1,500 pairs of jeans and the raw materials costs her £8 per pair.
What is her total cost of sales? |
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Gross profit
Gross profit - is the money made from selling a product after the cost of purchasing it has been deducted
Gross profit = Revenue - cost of sales (this will not be given to you in the exam) |
A garden centre sells plants and sheds
- Its revenue from plants last year was £60,000 and costs of sales were £15,000 - It's revenue from sheds was £80,000 and costs of sales were £25,000 Calculate the gross profit for his business (2 marks) |