Accounting case study. Dear Mr Han I am writing this letter to explain how the profit and loss account and balance sheet that you have received works.
Name: Hannah Clark - Year/Group: BTEC National Diploma in Business – Yr1 - Lecturer: Richard Taylor
Unit 5 – Introduction to Accounting
Waters, Gilmour, Mason and Wright
Floyd House,
Grantchester Meadows,
Oxford,
OX3 5DS
Mr K Han
32 Crookdale Lane,
Ipswich,
IP32 6TY
31 July 2010
Explanation on how the profit and loss account and balance sheet
Dear Mr Han
I am writing this letter to explain how the profit and loss account and balance sheet that you have received works.
I would like to start off by explaining what the purpose of a profit and loss account is. This makes an accurate calculation of the profit or loss made by the business over a certain period of time. Depreciation in the profit and loss account is the loss in value of the assets in the business over a period of time. For example if there is a car or a van in the business the value of the car will depreciate over the years and will not be worth as much when it comes to selling it. The trading account is the basic process of a business. This shows how much profit the organisation makes by this basic business process, not including other costs that the business may incur. Some things that you would find in a trading account are: