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Trading Profit And Loss Account

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Trading Profit And Loss Account Trading Profit And Loss Account Presentation Transcript

  • Trading Profit and Loss Account Mr Arthur & Mr McGowan
  • Introduction
    • The Trading, Profit and Loss Account is one of the Final Accounts drawn up by a business, showing trading activities for one year
    • It enables the owner of the business to determine the amount of profit the business is making for one year
    • It has 2 constituent parts
      • Trading Account
      • Profit and Loss Account
  • Trading Account
    • All information about goods bought, sold and returned has to be gathered together in a statement called a trading account.
    • You get the information for the Trading Account from your Ledger Accounts (Record of all the day-to-day activities)
  • Trading Account         £2,700     GROSS PROFIT 300     Cost of Goods Sold   200   Less Closing Stock   500       400   Purchases   100   Opening Stock       Less: Cost of Goods Sold 3000     Sales £ £ £         Trading Account of Dave Jones business for the month ended 30 September 2005
  • Profit and Loss Account
    • The Profit and Loss Account is prepared to show the costs that have been incurred throughout the year, for example, Rent, Wages, Lighting and Heating
    • These costs are taken away from the Gross Profit to give the Net Profit for the year
    • Trading and Profit and Loss Accounts are combined Accounts where both the Gross and Net Profits are calculated
  • Other Items in the Trading, Profit and Loss Accounts
    • Other Items in the Trading Account
      • Commission Received
      • Rent Received
      • Add theses figures on to the Gross Profit
    • Other Expenses
      • Carriage Out, Cleaning, Interest on Loan, Bank Charges
  • Other Items in the Balance Sheet
    • Other Fixed Asset Items
      • Furniture and Fittings
    • Other Current Asset Items
      • Stock (Make sure that you take the Stock at the end figure)
    • Other Current Liability Items
      • Loans, Bank Overdraft
  • Profit and Loss Account Key Terms
    • Trading account – provides summary of business’s trading activity during financial year
    • Sales – monies received through selling goods/services
    • Cost of sales – cost of sales to a business before a profit margin is added
    • Opening stock – value of stock at start of the financial period
    • Closing stock – value of stock at end of the financial period
    • Purchases – cost of goods business has bought for resale to customers
    • Purchase returns – value of goods purchased but returned to supplier
    • Sales returns – value of goods bought by customer but returned to the firm
    • Expenses – any expenses incurred by the business in the course of normal operation
    Profit and Loss Account Key Terms
  •