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Trading Profit And Loss Account


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Trading Profit And Loss Account

  1. 1. Trading Profit and Loss Account Mr Arthur & Mr McGowan
  2. 2. Introduction <ul><li>The Trading, Profit and Loss Account is one of the Final Accounts drawn up by a business, showing trading activities for one year </li></ul><ul><li>It enables the owner of the business to determine the amount of profit the business is making for one year </li></ul><ul><li>It has 2 constituent parts </li></ul><ul><ul><li>Trading Account </li></ul></ul><ul><ul><li>Profit and Loss Account </li></ul></ul>
  3. 3. Trading Account <ul><li>All information about goods bought, sold and returned has to be gathered together in a statement called a trading account. </li></ul><ul><li>You get the information for the Trading Account from your Ledger Accounts (Record of all the day-to-day activities) </li></ul>
  4. 4. 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
  5. 5. Profit and Loss Account <ul><li>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 </li></ul><ul><li>These costs are taken away from the Gross Profit to give the Net Profit for the year </li></ul><ul><li>Trading and Profit and Loss Accounts are combined Accounts where both the Gross and Net Profits are calculated </li></ul>
  6. 6. Other Items in the Trading, Profit and Loss Accounts <ul><li>Other Items in the Trading Account </li></ul><ul><ul><li>Commission Received </li></ul></ul><ul><ul><li>Rent Received </li></ul></ul><ul><ul><li>Add theses figures on to the Gross Profit </li></ul></ul><ul><li>Other Expenses </li></ul><ul><ul><li>Carriage Out, Cleaning, Interest on Loan, Bank Charges </li></ul></ul>
  7. 7. Other Items in the Balance Sheet <ul><li>Other Fixed Asset Items </li></ul><ul><ul><li>Furniture and Fittings </li></ul></ul><ul><li>Other Current Asset Items </li></ul><ul><ul><li>Stock (Make sure that you take the Stock at the end figure) </li></ul></ul><ul><li>Other Current Liability Items </li></ul><ul><ul><li>Loans, Bank Overdraft </li></ul></ul>
  8. 8. Profit and Loss Account Key Terms <ul><li>Trading account – provides summary of business’s trading activity during financial year </li></ul><ul><li>Sales – monies received through selling goods/services </li></ul><ul><li>Cost of sales – cost of sales to a business before a profit margin is added </li></ul><ul><li>Opening stock – value of stock at start of the financial period </li></ul><ul><li>Closing stock – value of stock at end of the financial period </li></ul>
  9. 9. <ul><li>Purchases – cost of goods business has bought for resale to customers </li></ul><ul><li>Purchase returns – value of goods purchased but returned to supplier </li></ul><ul><li>Sales returns – value of goods bought by customer but returned to the firm </li></ul><ul><li>Expenses – any expenses incurred by the business in the course of normal operation </li></ul>Profit and Loss Account Key Terms