1 / 14

The profit & Loss Account

The profit & Loss Account. Made easy. Profit & Loss accounts are ALWAYS set out in the same way. You must learn this, and then it is easy to answer questions on them. SALES TURNOVER. 105,000,000. This shows how much the firm has sold during the year, & is always the starting point.

bhibbler
Download Presentation

The profit & Loss Account

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The profit & Loss Account Made easy

  2. Profit & Loss accounts are ALWAYS set out in the same way. You must learn this, and then it is easy to answer questions on them.

  3. SALES TURNOVER 105,000,000 This shows how much the firm has sold during the year, & is always the starting point.

  4. SALES TURNOVER 105,000,000 Less cost of goods sold 65,000,000 You now subtract the cost of actually making the goods. This is the cost of goods sold. It is shown as a total. But is worked out as follows…

  5. How much raw materials you’ve got left over from last year • Opening stock 12,000,000 • + Purchases 58,000,000 • 70,000,000 • Closing stock 5,000,000 • 65,000,000 How much stock you bought in the year. Unsold stock at the end of year

  6. SALES TURNOVER 105,000,000 Less cost of goods sold 65,000,000 Gross Profit 40,000,000 Sales minus cost of goods sold = Gross profit.

  7. SALES TURNOVER 105,000,000 Less cost of goods sold 65,000,000 Gross Profit 40,000,000 Less Expenses 15,000,000 Next you subtract the general expenses of a business. In published accounts they will be a total, but for internal use they will be itemised Expenses include things Like: Advertising; heating; wages; insurance; office; transport. The list is endless. It does not include purchasing of assets.

  8. One of the things included in expenses is depreciation. This is profit put aside to replace old and knackered machinery. More on this anon.

  9. SALES TURNOVER 105,000,000 Less cost of goods sold 65,000,000 Gross Profit 40,000,000 Less Expenses15,00 ,000 0 Operating profit 25,000 ,000 What’s left is called operating profit. Or net profit. Or profit before interest & tax

  10. SALES TURNOVER 105,000,000 Less cost of goods sold 65,000,000 Gross Profit 40,000,000 Less Expenses15,00000 ,0 Operating profit 25,000 ,000 Less Interest 4,000 ,000 Next, we take off any interest the firm has to pay.

  11. SALES TURNOVER 105,000,000 Less cost of goods sold 65,000,000 Gross Profit 40,000,000 Less Expenses15,000 ,000 Operating profit 25,000 ,000 Less Interest4,000 ,000 Profit before tax 21,000 ,000 What’s left is called profit before tax

  12. SALES TURNOVER 105,000,000 Less cost of goods sold 65,000,000 Gross Profit 40,000,000 Less Expenses15,000 ,000 Operating profit 25,000 ,000 Less Interest4,000 ,000 Profit before tax 21,000 ,000 Taxation 8,000 ,000 Profit after tax 13,000 ,000 Then we have to pay tax to the Government. What is left is called profit after tax.

  13. SALES TURNOVER 105,000,000 Less cost of goods sold 65,000,000 Gross Profit 40,000,000 Less Expenses15,000 ,000 Operating profit 25,000 ,000 Less Interest4,000 ,000 Profit before tax 21,000 ,000 Taxation 8,000 ,000 Profit after tax 13,000 ,000 Dividend 6,000 ,000 Then the shareholders want a slice of the profit, this is called the Dividend

  14. SALES TURNOVER 105,000,000 Less cost of goods sold 65,000,000 Gross Profit 40,000,000 Less Expenses15,000,000 Operating profit 25,000,000 Less Interest4,000,000 Profit before tax 21,000,000 Taxation8,000 ,000 Profit after tax 13,000,000 Dividend6,000,000 Retained profit 7,000,000 What is left over is kept in the business to allow it to grow. This is called retained profit.

More Related