The order of the profit and loss account is that first you have the name of the owner, then you have the company name, then you have the name of the financial statement and then their have the date as for the year ended. The name of the owner is Isaac Swery and the company name is Home Sweet Home. Then the name of the financial statement is trading, profit and loss account and the date for the year ended is 31st of December 20XY. So this means the trading year started on the 1st of January 20XY then you start with your sales revenue which is £845,500, then cost of sales which is £188,000 and then the gross profit which is the £657,500. In order to work out the gross profit you need to deduct the cost of the sales from the sales revenue and that will give you a gross profit. After the gross profit you have the expenses and net profit. In order to work out the net profit you need to deduct the expense which is £307,690 from the gross profit and that will give you a net profit for the financial year which is £349,810.
The items which make up a profit and loss account are the sales revenue, cost of sales and expenses. From these items, you get to work out the gross profit and net profit figures.
A profit and loss account is important to a business as it shows the profit or loss the business has made at the end of the financial year. It will allow a future investor to see how much the business is making every year and decide whether it is worth taking a risk in investing in this business.
Balance sheet
A balance sheet is a statement of the business assets, liabilities and equity. A balance sheet is important because it gives you a snapshot of the business financial strength at a specific period of time.
The structure of the balance sheet is split into five sections. At the top you have the fixed assets, and just below that you have the current assets, and below that you would have the current liabilities, then just below that you have the net assets and then you would have the financed by.
The order of the balance sheet is that first you have the name of the owner, then you have the company name, then you have the name of the financial statement and then their have the date for that specific time. The name of the owner is Isaac Swery and the company name is Home Sweet Home. Then the name of the financial statement is balance sheet and the date for that specific time is 31st of December 20XY. Then you start with your fixed assets, then the current assets and then the current liabilities.
The fixed asset is divided into 3 columns the first column has the cost of the asset, then the second column has the accumulated depreciation and the last column has the net book value. The fixtures and fitting, office equipment and vehicle all depreciate in value except the building it doesn’t depreciate in value for accounting reasons and value reasons. For example the fixture and fittings cost £50,000 but it depreciated in value by £20,000 so the net book value would be £30,000. Also the fixed asset is in order of the most e-liquid at the top and the most liquid at the bottom. This mean the hardest asset which the business could convert into cash is at the top and easiest asset which the business could convert into cash goes at the bottom. In order to do the workings out you need to add the fixed assets together and that will give you a total of the fixed assets.
The current asset is in order of the most e-liquid at the top and the most liquid at the bottom. This mean the hardest asset which the business could convert into cash is at the top and easiest asset which the business could convert into cash goes at the bottom. Then you add the current assets together and then you deduct he current liabilities from the current assets and that will give you a working capital. In addition to that you add the working capital to the total fixed assets and that will give you a net asset. Then you have the capital and this is made up of the opening capital, drawings and profit and that will give you the closing capital. In order to work out the closing capital you need to add the opening capital to the profit and deduct the drawings and that will give you the closing capital. For the balance sheet to be correct the closing capital figure needs to be the same as the net asset figure.
The items which make up a balance sheet is the fixed assets, current assets, current liabilities, net asset, financed by and the closing capital.
A balance sheet is important to a business as it shows the assets of the business and the amount the business is worth. It will allow a future investor to see how much the business is worth and decide whether it is worth taking a risk in investing in this business.
