We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byAspen Randal
Modified about 1 year ago
© Boardworks Ltd 2007 1 of 24 Profit and Loss Teacher’s notes included in the Notes PageFlash activity. These activities are not editable. Icons key: For more detailed instructions, see the Getting Started presentation Profit and Loss Unit 2: Business Finance Web addressesExtension activities Sound © Boardworks Ltd 2007 1 of 24
© Boardworks Ltd 2007 2 of 24 Learning objectives 2 of 24© Boardworks Ltd 2006 Why do businesses record their profit or loss? What is a financial year? What is a profit and loss account? What parts make up a profit and loss account? How are the figures calculated in a profit and loss account?
© Boardworks Ltd 2007 3 of 24 Every business – however small or large – aims to make a profit. For a business to be able to calculate whether it has made a profit, it must keep a profit and loss account. Profit and loss accounts Why is producing a profit and loss account useful for a business? A profit and loss account summarizes all of a business’s revenue and costs over a period of time, usually a year. The business then uses the figures in it to work out how much profit or loss it made.
© Boardworks Ltd 2007 4 of 24 A business produces a profit and loss account because: Profit and loss it is a legal requirement it sums up the performance of a business to its stakeholders it can be compared with the previous year’s performance investors or lenders need to see one before making deals it can help to forecast future profits and helps with planning. How could ICT help a business to prepare its profit and loss account?
© Boardworks Ltd 2007 5 of 24 The financial year The UK’s financial year runs from 6 April to 5 April. Businesses are legally required by the government to produce annual profit and loss accounts at the end of each financial year for the Inland Revenue. At the end of each financial year private limited (Ltd) and public limited (PLC) companies must produce audited annual accounts for the Inland Revenue – for it to calculate how much tax they owe. Do you know when the financial year begins and ends in the UK?
© Boardworks Ltd 2007 6 of 24 Profit and loss account A profit and loss account can be presented in different ways, but many businesses divide it into three distinct sections: the trading account the profit and loss account the appropriation account. It can be recorded by hand into an accounts ledger, or entered into a computer spreadsheet or accounts package.
© Boardworks Ltd 2007 7 of 24 1. The trading account The first section of the profit and loss account is called the trading account. It shows the revenue the business earned from sales, the cost of production and changes in stock. The business uses this data to work out how much gross profit it has made.
© Boardworks Ltd 2007 8 of 24 The layout of a trading account What will the closing stock become in the following year’s trading account?
© Boardworks Ltd 2007 9 of 24 Calculating the trading account Can you remember the formulae needed to complete a trading account? Sales revenue 67 865 £ £ Opening stock 24 514 Purchases 47 865 Closing stock 34 217 Cost of sales 38 162 Gross profit29 703 opening stock + purchases - closing stock = cost of sales sales revenue - cost of sales = gross profit
© Boardworks Ltd 2007 10 of 24 Completing a trading account
© Boardworks Ltd 2007 11 of 24 2. The profit and loss account The second section is called the profit and loss account as it is where the net profit before tax (or loss) is calculated. The profit and loss account records the business’s expenses or overheads so that the operating profit can be calculated.
© Boardworks Ltd 2007 12 of 24 The layout of the profit and loss account
© Boardworks Ltd 2007 13 of 24 Calculating a profit and loss account Can you remember the formulae needed to complete a trading account? Gross profit £ £ Expenses Salaries/wages 29 703 8 246 Rent Utilities Equipment Other Operating Profit Interest on loans Net profit before tax 3 456 1 897 965 587 Total expenses15 151 14 552 1 216 13 336 Total expenses = the sum of all the expenses Gross profit - total expenses = operating profit Operating profit - interest on loans = net profit before tax
© Boardworks Ltd 2007 14 of 24 Completing a profit and loss account Why is it useful for a business to work out its operating profit?
© Boardworks Ltd 2007 15 of 24 3. The appropriation account The third section of the profit and loss account is the appropriation account. It shows exactly what has happened to the net profit before tax the business made. It shows the tax the business had to pay (corporation tax if it is a company or income tax if not). Then it shows the dividends it paid to its shareholders and any retained profit it kept for reinvestment.
© Boardworks Ltd 2007 16 of 24 The appropriation account Write a sentence to describe each term in your own words.
© Boardworks Ltd 2007 17 of 24 Calculating a trading account Can you remember the formulae needed to complete an appropriation account? Net profit before tax £ £ Corporation tax Profit after tax Dividends Retained profit Net profit before tax - corporation tax = profit after tax Profit after tax - dividends = retained profit 13 336 2 667 10 669 4 897 5 772
© Boardworks Ltd 2007 18 of 24 Completing an appropriation account
© Boardworks Ltd 2007 19 of 24 Who uses a profit and loss account?
© Boardworks Ltd 2007 20 of 24 Using ICT
© Boardworks Ltd 2007 21 of 24 Profit and loss account activity Complete this profit and loss account by entering the missing values into the coloured cells.
© Boardworks Ltd 2007 22 of 24 Question time! 1.What is another name for a business’s sales revenue? 2.Does the money spent on materials affect the gross profit figure only, the net profit figure only or both profit figures? 3.What is the formula for profit after tax? 4.Which type of profit shows how successful the business activity has been?
© Boardworks Ltd 2007 23 of 24 Who wants to be an A* student?
© Boardworks Ltd 2007 24 of 24 Glossary
© Boardworks Ltd of Costs, Revenue and Profit for Business Organizations Unit 3: Investigating Financial Control © Boardworks Ltd
FINAL ACCOUNTS All companies or corporations ( businesses owned by shareholders) must provide a set of final accounts consisting on three statements:
Budgets Teacher’s notes included in the Notes PageFlash activity. These activities are not editable. Icons key: For more detailed instructions, see the.
25 seconds left….. 24 seconds left….. 23 seconds left…..
5.3.3 Income Statements 1. Learning Outcomes To understand the main features of an income statement To be able to use simple income statements in decision.
1 Calculating the profit or loss of a business. * Profit (what it is and why it matters) * Purpose and main elements of profit/ loss account All students….
Profit & Loss Account ACCOUNTING & FINANCE. Introduction and Key Definitions A statement recording all a firm ’ s revenues and costs within a past trading.
Accounting and Financial Reporting Back to Table of Contents.
IB Business and Management 3.5 Final Accounts - Income Statements (Profit and Loss Accounts)
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE Financial Planning Financial Records.
PSSA Preparation. Question 1(no calculator) D Question 2 (no calculator)
Chapter 13 How Cells Obtain Energy from Food Essential Cell Biology Third Edition Copyright © Garland Science 2010.
Jeopardy Topic 1Topic Q 1Q 6Q 11Q 16Q 21 Q 2Q 7Q 12Q 17Q 22 Q 3Q 8Q 13Q 18Q 23 Q 4Q 9Q 14Q 19Q 24 Q 5Q 10Q 15Q 20Q 25 Final Jeopardy.
Year 13 A2 Business Studies Company accounts. There are two main documents: Income statement (previously called profit and loss account) Balance sheet.
Remember these…. Net profit Gross Profit Cost of sales Sales Overheads (animation)
1. 2 Objectives Identify economic needs and wants. Describe the three uses of money. Explain how business satisfies economic needs. Describe the three.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 15-1 Preparing an Income Statement.
© Boardworks Ltd of 28 Balance Sheets Teacher’s notes included in the Notes PageFlash activity. These activities are not editable. Icons key: For.
We will resume in: 25 Minutes We will resume in: 24 Minutes.
CHAPTER 11 RECORD KEEPING AND ACCOUNTING February 12, 2014ENTREPRENEURSHIP (Ms. Hawkins)1 This chapter describes the importance of keeping business records.
Slide 15.1 Pauline Weetman, Financial and Management Accounting, 5 th edition © Pearson Education 2011 Chapter 15 Reporting cash flows.
Teacher’s notes included in the Notes PageFlash activity. These activities are not editable. Web addresses Icons key: For more detailed instructions, see.
Finance National 4/5 Business Management. Learning Outcomes 2.1 – Sources of Finance (costs & benefits) 2.2 – Breakeven Charts 2.3 – Cash Budgets.
WEEK 1 You have 10 seconds to name…
Conducted by: Mr. Koy Chumnith Review of the Accounting Process , Royal University of Law and Economics McGraw-Hill/Irwin.
Accounts. Key Accounting Documents Public Limited Companies in the UK are required to publish their accounts This will usually consist of three key accounting.
DIVIDING INTEGERS 1. IF THE SIGNS ARE THE SAME THE ANSWER IS POSITIVE 2. IF THE SIGNS ARE DIFFERENT THE ANSWER IS NEGATIVE.
Chapter 14 Short-Term Financial Planning. Copyright ©2014 Pearson Education, Inc. All rights reserved.14-1 Learning Objectives 1.Use the percent of sales.
Addition 1’s to
Unit 3 Accounts & Finance Financial Accounts. Learning Objectives To be able to construct and ammend accounts from information given To be able to identify.
Chapter 11 Membrane Structure Essential Cell Biology Third Edition Copyright © Garland Science 2010.
Accounts Interpreting Accounts. Key Accounting Documents Public Limited Companies in the UK are required to publish their accounts This will usually consist.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved
Chapter 4-1 Completing the Accounting Cycle Accounting Principles, Ninth Edition.
© 2011 South-Western | Cengage Learning Global Entrepreneurship and Small Business Management Entrepreneurial Enterprises The Business Plan.
CHAPTER 14 Statement of Cash Flows. The McGraw-Hill Companies, Inc. 2008McGraw-Hill/Irwin 14-2 Chapter Opening To make informed investment and credit.
Period 1 – Year 10 Business Use the 5 slides below to complete your presentation on Costs and Revenues – You have until 9.50am to complete this – add extra.
Addition Facts = = =
McGraw-Hill /Irwin© 2009 The McGraw-Hill Companies, Inc. ACCOUNTING CHANGES AND ERROR CORRECTIONS Chapter 20.
Chapter 10 Analyzing Genes and Genomes Essential Cell Biology Third Edition Copyright © Garland Science 2010.
The Profit and Loss Account. What is Profit & Loss all about? The profit and loss account is actually 3 different things all rolled into one! The names.
Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 9.1 Chapter 9 Income statements.
Managing Finance and Budgets Lecture 5 Profit & Loss Accounts.
Chapter 36 Financing the Business 1 Marketing Essentials Chapter 36 Financing the Business Section 36.2 Financial Aspects of a Business Plan.
Lecture 1. Accounting is “the language of business.” More precisely, accounting is a system of maintaining records of a company’s operations and communicating.
© Boardworks Ltd of 22 Cash Flow Forecasts Teacher’s notes included in the Notes PageFlash activity. These activities are not editable. Icons key:
© Boardworks Ltd of 20 Teacher’s notes included in the Notes PageFlash activity. These activities are not editable. Icons key: For more detailed.
© 2017 SlidePlayer.com Inc. All rights reserved.