Associate
Way to complicate things, guys!!!Nelson said:You're mixing up the two fundamentals of accounting there, capital & revenue. Revenue has nothing to do with assets/liabilities. Assets and liabilities are Balance Sheet items, revenue is to do with Profit & Loss.
The Accounting Equation: Capital = Assets - Liabilities
The Business Equation: Profit = Income - Expenditure
Turnover = Sales. I know turnover has other meanings (for example, the company has a high staff turnover) but in rs125's example when he talks about turnover he's talking about sales.
If in 2005 you sell a car for £1600, your turnover is £1600.
But, what gives you the impression that your costs are irrelevant?
Turnover £1,600
Costs -£1,400
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Profit £200
You'll be taxed on your profit. If the tax rate is 20%, you'll pay £40 in tax.