Define the terms used in a trading and profit and loss account and balance sheet.

A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity

Assets – things they own

Liabilities – things they owe (suppliers, loans/overdraft, and mortgage)

Trading profit and loss word meaning

 Trading profit and loss statement - A trading, profit and loss account shows the business's financial performance over a given time period.  

1. Turnover - the amount of money taken by a business in a particular period, for instance Abscon Ltd have a turnover of £1500,000 in 20014 and £1300,000 in 2013
2.  Cost of sales - on an income statement, the cost of purchasing raw materials and manufacturing finished products, there cost of sales in 2014 totalled to £860,000
3.  Opening stock – stock of an item at the beginning of the financial year, at 2014 they had £100,000 of opening stock 
4. Purchases - To obtain in exchange for money or its equivalent; buy.
5. Closing stock – a business’s remaining stock at the end of the financial year. It includes finished products, raw materials or work in progress and is deducted from the period’s costs in the balance sheets.
6. Gross profit – The difference between revenue and the cost of producing goods or services sold. It is sometimes expressed as a percentage.  
7. Expenses – money or costs incurred in a business’s efforts to generate revenue, representing the cost of doing business
8. Wages - a fixed regular payment earned for work or services, typically paid on a daily or weekly basis
9. Salaries - a fixed regular payment, typically paid on a monthly basis but often expressed as an annual sum, made by an employer to an employee, especially a professional or white-collar worker
10. Operating profit - profit from business operations (gross profit minus operating expenses) before deduction of interest and taxes
11. Net interest – the total amount of interest paid by a business on funds it has borrowed less the amount of income earned in interest on amounts it has lent out or invested
12.  Profit before tax - company's profits before the company has to pay corporate income tax. This measure deducts all expenses from revenue including interest expenses and operating expenses, but it leaves out the payment of tax.
13. Corporation tax - tax imposed on companies' profits
14. Profit after tax – The net amount earned by a business after all taxation related expenses have been deducted
15.  Dividend - a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).
16. Retained profit - Retained profit is the profit kept in the company rather than paid out to shareholders as a dividend.  Retained profit is widely regarded as the most important long-term source of finance for a business.