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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.

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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. ...read more.


- for a manufacturing organisation this is the value of raw materials purchased; for a service business it would be the cost of items bought to sell to customers or used to provide a service to customers. The costs of goods sold are calculated by opening stock + purchases - purchase returns - closing stock. This is shown on my example profit and loss account. Overheads are things like rent and rates and they do not change throughout the year no matter how much they sell, there is also an example on my profit and loss account. Gross profit is calculated by the net sales - cost of goods sold. ...read more.


received is when the business may sell a product o a service on behalf of another organisation and then they may receive commission for selling the other businesses products or services. This is an explanation on how you know that the accounts balance. Capital + net profit - the amount the owner has paid off = less drawings. So net assets and less drawings are the two figures on the accounts that have to be the same for the account to balance. I hope that this letter has helped you figure out how the profit and loss accounts and balance sheet works. Yours sincerely Hannah Clark Accountant Enc. ?? ?? ?? ?? \\Adata1\Users\hannah.clark01\My Documents\Introduction to Accounting\p4 k han letter.doc 1 hannah.clark01 09/06/2010 hannah.clark01 ...read more.

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