1. The Profit and Loss Account
What you need to know!

2. 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!

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

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

5. 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

7. Over to you!