Profit & Loss Statement:
This document outlines a company's income and expenses over a specific time frame, typically from April 1st to March 31st.
Balance Sheet:
A financial statement that details a company's assets and liabilities as of a certain date.
Revenue:
The total income generated from selling goods and services, including both cash and credit sales.
Cost of Goods Sold (COGS):
The direct costs associated with manufacturing or acquiring products that are sold to customers.
Gross Profit:
The profit calculated by subtracting the cost of goods sold from total revenue, excluding operating expenses like salaries and rent.
Operating Expenses:
Costs not directly tied to the production of goods, such as rent, salaries, and general administrative expenses.
Interest:
The cost incurred for borrowing funds, paid to lenders on outstanding loan balances.
Depreciation:
The yearly allocation of the cost of fixed assets over their useful life, recorded as an expense in the profit and loss statement.
Profit Before Tax:
Calculated as Gross Profit minus Operating Expenses, Interest, and Depreciation.
Assets:
Comprised of current assets like cash and inventory, as well as non-current or fixed assets like machinery and equipment.
Liabilities:
Include shareholder equity, current liabilities such as creditors and short-term loans, and long-term liabilities that are due beyond one year.
Receivables:
Payments expected from customers at a future date, as agreed upon in sales contracts.
Current Assets:
Assets that are liquid or can be quickly converted into cash, such as cash on hand and account receivables.
Fixed Assets:
Long-term assets used in business operations, not intended for sale, like plant and equipment.
Cash Credit:
Short-term loans used to finance day-to-day business operations and manage working capital.
Term Loan:
Long-term financing obtained to purchase fixed assets, repaid over time in installments.
Equity Capital:
Funds contributed by shareholders representing their ownership stake in the company.
*The information in this document has been adapted from articles and posters available on https://www.rbi.org.in/FinancialEducation/Home.aspx The original articles can be accessed directly for more comprehensive insights.
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