The Profit and Loss Account What you need to know!

What does a Trading Account show? A Trading Account shows gross profit This profit cannot be kept by the business There are lots of costs which need to be taken before profit can be kept When all costs are removed we have Net Profit The business can keep net profit!

Costs A business must pay These are expenses Wages Rates Insurance Heating and lighting Advertising Administration Loan repayments These are expenses

Picture House Ltd Profit and Loss Account for year ended 31 December 2001

Creating a Profit and Loss Account Start with the Trading Account Add an expenses section to include all appropriate expenses for this business. Sum the expenses Net Profit = Gross Profit – total Expenses

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