## Sales turnover is the money coming into the business from providing a trade – for example

Sales turnover is the money coming into the business from providing a trade – for example, selling goods, manufacturing goods, providing a service. The calculation for sales turnover is quantity sold x selling price.
Cost of goods sold includes the costs directly linked to providing that trade, for example, the cost of buying in the goods or the raw materials used to produce the goods. To work out the cost of goods sold, a simple calculation is done to ensure that the fi gure recorded for cost of goods sold can be directly linked to the goods actually sold and not just all the materials purchased. If, for example, I was to buy 12 balls of wool and knit a jumper, is the cost of wool for that jumper 12 balls? What if I had three spare balls to start with or two balls left at the end? The calculation for cost of goods sold is opening stock + purchases ? closing stock.
3. Gross profit is the amount of money left or the surplus after the cost of goods sold has been deducted from the sales turnover. This is not, however, the business’s final profi t as there are still other expenses to deduct in the next part of the account. The calculation for gross profi t is sales turnover ? cost of goods sold.