P5 – Interpret the contents of a profit and loss account and balance sheet for a selected company.
A profit and loss account is an account in the books of a company to which incomes
and gains are credited and expenses and losses debited, so as to show the net profit or
loss over a given period.
A balance sheet is a statement of the liabilities, assets, and capital of a business at a
certain point in time, showing the balance of income and expenditure over the time
period.
1. What is the purpose of a profit and loss account?
The purpose of the profit and loss account is to show whether a business has made a
profit or a loss over a year financially. A profit and loss account will start with the
company's trading account and then takes into account all the other expenses
associated with the business. A trading account will have the income from sales and
the costs of making those sales. It also includes the balance of the stocks at the start
and the end of the year.
2. What is the purpose of a balance sheet?
The balance sheet is a snapshot at a point in time of the company's accounts – it
covers its assets, liabilities and shareholders' value. The purpose of the balance
sheet is to give people an idea of the company's financial position as well as
displaying what the company owns and owes.
McDonalds Profit and Loss Account
A profit and loss account is an account in the books of a company to which incomes
and gains are credited and expenses and losses debited, so as to show the net profit or
loss over a given period.
A balance sheet is a statement of the liabilities, assets, and capital of a business at a
certain point in time, showing the balance of income and expenditure over the time
period.
1. What is the purpose of a profit and loss account?
The purpose of the profit and loss account is to show whether a business has made a
profit or a loss over a year financially. A profit and loss account will start with the
company's trading account and then takes into account all the other expenses
associated with the business. A trading account will have the income from sales and
the costs of making those sales. It also includes the balance of the stocks at the start
and the end of the year.
2. What is the purpose of a balance sheet?
The balance sheet is a snapshot at a point in time of the company's accounts – it
covers its assets, liabilities and shareholders' value. The purpose of the balance
sheet is to give people an idea of the company's financial position as well as
displaying what the company owns and owes.
McDonalds Profit and Loss Account
