Presentation on theme: "By: Miss Siti Norhidayah Hamid. The profit & loss statement is a financial statement. It is used as the primary means of evaluating the economic performance."— Presentation transcript:
The profit & loss statement is a financial statement. It is used as the primary means of evaluating the economic performance of the business for a period of time. It also called: a)Profit & Loss account b)Income statement c)Statement of revenues and expenses d)Earning statement
Is defined as the different between the total revenue earned for a period of time and the total expenses incurred in earning the revenue for the same period of time (accounting period). Accounting period can be a month, 6 months or a year.
are earned (or recognized) when a business sells goods and / or services to its customers, which results in an flow of assets such as cash or debtors. Refers to the using up of assets in earning revenues. Revenues Expenses (including cost)
Cost of good sold (cost of sales) Wages expense Salaries Discounts Allowed Interest expense Insurance expense Rent expense Electricity expense Postage expense Motor expense Legal expense Audit fees Accounting fees Employees’ Provided Fund Contributions Repair and maintenance Depreciation
Profit (P) = Revenues (R) – Expenses incurred (E) P = R- E When the ringgit amount of the expenses exceed the ringgit amount of the revenues, the negative profit would result, which is called a loss.
1- The Name of the business 2- The Title of the statement, “Profit and Loss Statement” 3- the time period covered by the statement Include 3 pieces of information:
The body of the profit and loss statement consist of two main components, which is revenues and expenses. It can be presented in either of two ways, by vertical form or horizontal form.
To inform the owner of the amount of profit that a business has made for a period of time To periodically submit to the department of inland revenue as the mount of taxable income to be paid To indicate the managers as to the profitability and efficiency of the business
To inform potential investors who may be keen in investing in or buying up the business
Recall- Accounting equation??? ASSET = LIABILITIES + OWNERS EQUITY Since then, P = R – E So, A* = L* + [ OE + ( R – E ) ] A* = L* + ( OE + P )
Such withdrawals of cash / goods are referred to as ‘drawings’. It happen when the owners take cash or goods out of the business for his personal used Drawings decrease both the assets of the business and the owners equity.
What is accounting profit? Define revenues and expenses and give four examples of each. What are the purpose of calculating the profit? Thank you ……