Introduction: In this assignment I will be describing the balance sheet (balance sheet is a financial
statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point
in time.) and profit and loss account (A profit and loss statement (P&L) is a financial statement that
summarizes the revenues, costs and expenses incurred during a specific period of time, usually a
fiscal quarter or year. for the selected company, using the example made in previous
assignment, I will describe each title saying what is this for and why for Monsoon.
Monsoon
Tra
ding, Profit and Loss Account for year
ended 31 October 2016
£ £
Sales 2,670,000
Cost of Sales 500000
Gross profit 2,170,000
Expenses
Depreciation - Plant and Machinery 75,000
Depreciation - Fixtures and Fittings 16200
Bank loan repayment 18,000
Heating and Lightning 14,400
Building insurance 12,000
Personal Liability insurance 15,000
Internet and telephone 12,000
Post 5,400
200,00
Wages and salaries 0
Rent 60,000
Printing and Stationery 2,400
Rates 4,500
Advertisement 7,800
442,70
Total expenses 0
Net profit 1,727,300
Sales: Is the income that the business receive from selling their goods and services.
, Every business that is aiming to make profits is set to sale goods, this means Monsoon also counts in
this category. Their sales are huge as the company is well known and recognized across the UK. This
mean their sales will big. If the sales are big the revenue coming from the sale is also big, this is the
most important factor in business, to sales goods on big scale and receive big revenue. Sales have the
biggest impact on the business, as without it, the business would not be able to operate and expand
their brand and develop their quality. As we can see on the profit and loss for Monsoon in 2015 their
revenue from sales is £2,670,000 which is great amount when we compare how much they spend on
the cost of sales.
Cost of sales: is the cost that the business takes after buying necessary resources in order to sell
goods, so for example to sell computer, you need first to put software inside it and that is part of cost
of sales, as it will be sold later on for larger amount of money.
As we can see on the profit and loss sheet Monsoon spend £500000 on their cost of sales, comparing
it to the revenue that came from the sales, they made roughly 4 times more money than investing it
in the resources to sell the goods. That’s how we can recognise a successful business, when they
break even and then hit profit after taking away the cost of sales. Cost of sales is the
direct costs attributable to the production of the goods on the resources in order to sell the goods
later on. Other expenses are not counted in this amount, so things such as salaries and other are
coming under “expenses”.
Gross Profit: is the amount of money that is left after taking away the cost of sales from the revenue
income from selling goods (sales). So its Sales – Cost of sales = Gross profit.
The gross profit that we can see on the Monsoon profit and loss account is very satisfying for them,
as they made 4 times more money on their sales than spending on the cost of sales, based on this
information we can calculate the gross profit for the business. When we have the exact amount of
money from the sales then we taking away from this amount the total cost of sales and this equal the
gross profit. The money that is left after taking away the cost of sales is 2,170,000, this is a very good
result for a business.
Expanses: is the money that is spend by the business, on expenses, fixed assets, current assets as so
on.
Every business has expanses, as it includes paying the wages to their employees, buying machinery,
paying for the bills, rent, insurances and so on. These expanses are counted separately from the cost
of sales as this is two different things, but expanses are also taken away from the gross profit. So this
mean the business will know their real profit after taking away the cost of sales + expanses = actual
profit.
Total Expanses: Is the total amount of money spend on the business expanses, in Monsoon example
its 442,700.
The total expenses are calculated at the end of each month or year, and it will show how much the
business spend on specific expenses, such as salaries, insurance. The business must do calculations
of such things in order to forecast their expenses in the following year, this may help the business to
invest more money into the development of the business. As the forecast may show that they will
spend less or same amount. If it shows they will spend more the business needs to make some
adjustments to the budget.
statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point
in time.) and profit and loss account (A profit and loss statement (P&L) is a financial statement that
summarizes the revenues, costs and expenses incurred during a specific period of time, usually a
fiscal quarter or year. for the selected company, using the example made in previous
assignment, I will describe each title saying what is this for and why for Monsoon.
Monsoon
Tra
ding, Profit and Loss Account for year
ended 31 October 2016
£ £
Sales 2,670,000
Cost of Sales 500000
Gross profit 2,170,000
Expenses
Depreciation - Plant and Machinery 75,000
Depreciation - Fixtures and Fittings 16200
Bank loan repayment 18,000
Heating and Lightning 14,400
Building insurance 12,000
Personal Liability insurance 15,000
Internet and telephone 12,000
Post 5,400
200,00
Wages and salaries 0
Rent 60,000
Printing and Stationery 2,400
Rates 4,500
Advertisement 7,800
442,70
Total expenses 0
Net profit 1,727,300
Sales: Is the income that the business receive from selling their goods and services.
, Every business that is aiming to make profits is set to sale goods, this means Monsoon also counts in
this category. Their sales are huge as the company is well known and recognized across the UK. This
mean their sales will big. If the sales are big the revenue coming from the sale is also big, this is the
most important factor in business, to sales goods on big scale and receive big revenue. Sales have the
biggest impact on the business, as without it, the business would not be able to operate and expand
their brand and develop their quality. As we can see on the profit and loss for Monsoon in 2015 their
revenue from sales is £2,670,000 which is great amount when we compare how much they spend on
the cost of sales.
Cost of sales: is the cost that the business takes after buying necessary resources in order to sell
goods, so for example to sell computer, you need first to put software inside it and that is part of cost
of sales, as it will be sold later on for larger amount of money.
As we can see on the profit and loss sheet Monsoon spend £500000 on their cost of sales, comparing
it to the revenue that came from the sales, they made roughly 4 times more money than investing it
in the resources to sell the goods. That’s how we can recognise a successful business, when they
break even and then hit profit after taking away the cost of sales. Cost of sales is the
direct costs attributable to the production of the goods on the resources in order to sell the goods
later on. Other expenses are not counted in this amount, so things such as salaries and other are
coming under “expenses”.
Gross Profit: is the amount of money that is left after taking away the cost of sales from the revenue
income from selling goods (sales). So its Sales – Cost of sales = Gross profit.
The gross profit that we can see on the Monsoon profit and loss account is very satisfying for them,
as they made 4 times more money on their sales than spending on the cost of sales, based on this
information we can calculate the gross profit for the business. When we have the exact amount of
money from the sales then we taking away from this amount the total cost of sales and this equal the
gross profit. The money that is left after taking away the cost of sales is 2,170,000, this is a very good
result for a business.
Expanses: is the money that is spend by the business, on expenses, fixed assets, current assets as so
on.
Every business has expanses, as it includes paying the wages to their employees, buying machinery,
paying for the bills, rent, insurances and so on. These expanses are counted separately from the cost
of sales as this is two different things, but expanses are also taken away from the gross profit. So this
mean the business will know their real profit after taking away the cost of sales + expanses = actual
profit.
Total Expanses: Is the total amount of money spend on the business expanses, in Monsoon example
its 442,700.
The total expenses are calculated at the end of each month or year, and it will show how much the
business spend on specific expenses, such as salaries, insurance. The business must do calculations
of such things in order to forecast their expenses in the following year, this may help the business to
invest more money into the development of the business. As the forecast may show that they will
spend less or same amount. If it shows they will spend more the business needs to make some
adjustments to the budget.
