ACCOUNTING TERMINOLOGIES PART : 2

ALL ABOUT ACCOUNTING :- 28th BLOG

☆☆☆ACCOUNTING☆☆☆

Hi freinds., 🙏

Today's discuss 10th to 15th accounting terminologies.....

So let's discuss .....

10. INCOME STATEMENT TERMS :

The Income Statement AKA Profit and Loss Statement is the second of the two common financial statements. These are the terms that are most commonly used in reference with this reporting tool.

The Income Statement (often referred to as a Profit and Loss, or P&L) is the financial statement that shows the revenues, expenses, and profits over a given time period. Revenue earned is shown at the top of the report and various costs (expenses) are subtracted from it until all costs are accounted for; the result being Net Income.

11. Cost of Goods Sold (COGS) :

Cost of Goods Sold are the expenses that directly relate to the creation of a product or service. Not included in this category are those costs that are needed to run the business. An example of COGS would be the cost of Materials, or the Direct Labor to provide a service.

12. Depreciation (Dep) :

Depreciation is the term that accounts for the loss of value in an asset over time. Generally, an asset has to have substantial value in order to warrant depreciating it. Common assets to be depreciated are automobiles and equipment. Depreciation appears on the Income Statement as an expense and is often categorized as a “Non-Cash Expense” since it doesn’t have a direct impact on a company’s cash position.

13. Expense (Cost) :

An Expense is any cost incurred by the business.

Learn more about personal vs. business expenses here.

14. Gross Profit (GP) :

Gross Profit indicates the profitability of a company in dollars, without taking overhead expenses into account. It is calculated by subtracting the Cost of Goods Sold from Revenue for the same period.

15. Gross Margin (GM) :

Gross Margin is a percentage calculated by taking Gross Profit and dividing by Revenue for the same period. It represents the profitability of a company after deducting the Cost of Goods Sold.

* How to calculate gross margin :

The idea that “cash is king!” is casually accepted as gospel by most small business owners. And it’s true, the ability to bring in money consistently is essential to the success of your business. That’s a no-brainer. However, many businesses aren’t aware of the vital differences between cash and revenue. The gross profit margin formula is a straightforward way for you to actually determine how much revenue you’ve made after accounting for the costs of goods or supplies.

Ready to learn more? This post discusses what the gross profit margin formula is, how to use it in your business, and how to improve your gross profit over time

*The Gross Profit Margin Formula :

The gross profit margin, sometimes called gross margin, helps you analyze your company’s overall financial health. Before looking at the formula itself, let’s define some key accounting terms:

Revenue: Money that flows into your company. You can find this number at the top of your income statement, which is what causes revenue to also be called “topline.”

Cash: This term doesn’t necessarily refer to literal dollar bills, but instead refers to your business’s bank account balance. Your business’s liquidity is most often dictated by your cash on hand. This amount appears on your company’s balance sheet.

★ GROSS PROFIT MARGIN CALCULATION FORMULA :