report on domestic dogs

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Akhtar Esmail Adam                             Unit 2                                                     J35081

Report on Domestic dogs Homes

Introduction

A profit and loss account is a summary of business transactions for a given period - normally 12 months. By deducting total expenditure from total income, it shows on the "bottom line" whether your business made a profit or loss at the end of that period.

A profit and loss account is produced primarily for business purposes - to show owners, shareholders or potential investors how the business is performing. But most of the information is also used by HM Revenue & Customs to work out your tax bill.

Do all businesses have to produce formal profit and loss accounts?

By law, if your business is a limited company or a partnership whose members are limited companies, you must produce a profit and loss account for each financial year.

Self-employed sole traders and most partnerships don't need to create a formal profit and loss account - the information they complete on the self-assessment tax return form amounts to the same thing.

However, there are key benefits to producing formal accounts. If you are looking to grow your business, or need a loan or mortgage, for example, most institutions will ask to see three years' accounts.

Domestic Dog Homes trading profit and loss account

What is the Cost of Sales?

If all items purchased during the year are sold then purchases is equal to the cost of sales. However, sometimes items purchased are not sold by the end of the year. These items are referred to as closing stocks. The cost of sales in these cases is not the total purchase figure. Instead it is equal to purchases less the items left unsold at the yearend i.e.:  purchases less closing stock

Sometimes stock existed at the beginning of the year because it remained unsold at the end of the previous year. This is referred to as opening stock. In these cases, the cost of sales is equal to: opening stock which existed at the beginning of the year, plus purchases made during the year, less closing stocks left unsold at the end of the year.

This leads to the principle for calculating gross profit which is:

Sales-Cost of Sales

 Which is:        Sales - [opening stock + purchases-closing stock]

Opening Stock. It is the stock which remained unsold at the end of previous year. It must have been brought into books with the help of opening entry; so it always appears inside the trial balance. Generally, it is shown as first item at the debit side of trading account. Of course, in the first year of a business there will be no opening stock

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Sales. Sales mean total sales i.e. cash plus credit sales. If there are any sales returns, these should be deducted from sales. So net sales are credited to trading account. If an asset of the firm has been sold, it should not be included in the sales.

Closing Stock. It is the value of stock lying unsold in the godown or shop on the last date of accounting period. Normally closing stock is given outside the trial balance in that case it is shown on the credit side of trading account. But if it is given inside the ...

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