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Profit and Loss Account

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Introduction

Btec - Business Accounting and Finance Introduction to Profit and Loss Account. The starting point in understanding the profit and loss account is to be clear about the meaning of "profit". Task of Accounting - Measuring Profit Opening Stock, Closing Stock, Purchases, Cost of Sales, Wages, Telephone, Motor expenses, Light and Heat, Rates, Rents, Sundry expenses. Cost of Sales are costs arising directly from producing or selling goods. Expenses are divided in to two parts:- * Selling and Distribution Costs (including marketing costs, delivery and distribution. * Administration Costs (general running of the business including rent, rates, telephone bill) Introduction to the Balance Sheet A balance sheet is a statement of the total assets and liabilities of an organisation at a particular date - usually the last date of an accounting period. ...read more.

Middle

Current Assets - are those that form part of the capital of a business. They are replaced converted in to cash during the course of trading. E.g:- Stocks, Trade debtors, Cash and customers. Customers buy the stock and they pay money, as they are current asset. Bank account money in cash. Assets - Something that a business owns. E.g:- machinery, equipments, vehicles, buildings. Liabilities - Debt any money that you own. * Long- Term * Short term (current liabilities) * Capital Liability owned by the business to the owner. Current Liabilities - are your debit will pay after a year. E.g:- Bank Overdraft, Trade creditors, financial debts. ...read more.

Conclusion

These are used in the Balance Sheet (Tangible Fixed Asset) * Land and buildings * Plant and machinery equipments * Fixtures, fittings, Tools and equipment * Vehicles * Assets in course of construction Intangible Fixed Assets * Trademarks and brand names * Licenses * Patents and copyrighted. Current Asset - The things that you can sell in the short term. * Provides a benefit for less than 12 months * Stocks * Debtors or amount receivable * Cash * Repayments Assets = Fixed Assets + Current Assets Liabilities = Shareholders fund + Long-term liabilities + Current Liabilities. Net Current Assets = Current assets - Current liabilities (Working Capital) Profit = Revenue - Costs. Gross Profit = Sales Revenue - Cost of sales Net Profit = Gross Profit - All Indirect Expenses Fixed assets + Net current assets ...read more.

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