P4:
Prepare a profit and loss account and balance sheet for an
organisation.
Purpose of the profit and loss account?
If a profit and loss account is made correctly it can show exactly the
profit or loss a business has made. It records sales, costs and profit in
a period of 12 months. The company can use this to see future
decision-making problems also investors or creditors can use the
profit and loss account to know if the company is making enough
money, so they can invest or offer and trading credit.
Purpose of the balance sheet?
The purpose of the balance sheet is to show the financial status of a
business at the end of a financial period. The sheet shows what an
entity needs to get (Liabilities) and how much money it needs to pay
(Equity). If the balance sheet is managed well, key decision makers
can evaluate the company`s current status and make changes of
needed.
COGS
COGS (Cost Of Goods Sold) are the cost made by a company when
selling their product(s) to their customers. The COGS is on the profit
and loss account. To calculate the cost of goods sold you need the
following formula: Opening Stock – Purchases – Closing Stock= Cost
Of Goods Sold.
Overhead Section
Overhead are expenses every business has like; Heat and Light costs,
Insurance Costs and Advertising Costs. The overhead is also on the
Profit and Loss Statement. Overhead expenses are needed to
maintain a business operation.
Gross Profit
Prepare a profit and loss account and balance sheet for an
organisation.
Purpose of the profit and loss account?
If a profit and loss account is made correctly it can show exactly the
profit or loss a business has made. It records sales, costs and profit in
a period of 12 months. The company can use this to see future
decision-making problems also investors or creditors can use the
profit and loss account to know if the company is making enough
money, so they can invest or offer and trading credit.
Purpose of the balance sheet?
The purpose of the balance sheet is to show the financial status of a
business at the end of a financial period. The sheet shows what an
entity needs to get (Liabilities) and how much money it needs to pay
(Equity). If the balance sheet is managed well, key decision makers
can evaluate the company`s current status and make changes of
needed.
COGS
COGS (Cost Of Goods Sold) are the cost made by a company when
selling their product(s) to their customers. The COGS is on the profit
and loss account. To calculate the cost of goods sold you need the
following formula: Opening Stock – Purchases – Closing Stock= Cost
Of Goods Sold.
Overhead Section
Overhead are expenses every business has like; Heat and Light costs,
Insurance Costs and Advertising Costs. The overhead is also on the
Profit and Loss Statement. Overhead expenses are needed to
maintain a business operation.
Gross Profit
