1a. Profit and Loss account
A profit and loss account is intended to show a business its income and expenditures and calculate the company’s net profit or loss based upon the difference between those figures. It is extremely useful in determining past performance and to try and predict future results. It enables a business to see what changes could make to improve on its profit. It also give enough information to help a business to set targets.
We can learn more from the statement. As it shows the expenses so we can see clearly see where the largest expenses are, this could then be used to identify the immediate areas to focus on when trying to save on expenses.
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1B) The Purpose of a Profit and Loss account
From looking at the statement I have found a few reasons for concern, The first I would like to point out is that even if the business is making a profit the margin from 2011 to 2012 in far less and has decreased dramatically. This could mean less money to reinvest into the business. If the same decrease was to happen in 2013 the business will make no profit and will lose money. Another cause for concern is the amount of money being spent on staff wages. The cost has risen but there is no greater outcome in terms of profit. Lastly from looking at the Cost of goods, there was a combined total of 896,000 for opening stock and purchased, this was far greater in the previous year, this could be that the business recognised they had 96,000 leftover so ordered less stoke in order to have less stoke leftover. However this did not work and a similar figure for less closing stoke appeared. This would suggest the demand for the product is demising and it is likely to continue for years to come.
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A. Balance sheet.
A balance sheet is a summary of the value of all assets, liabilities and Ownership equity for an organisation on a specific date.
The balance sheet is useful when looked at...