Profit and Loss

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A01- Profit and Loss

A profit and loss account is something businesses use to show them their revenue, costs and profits for that certain year, therefore showing the total amount of profit that the business has made that year, it is extremely important for the business, in particular for the accounts department who will refer to the profit and loss account a lot. This is because it clearly lays out what the business has spent, and what the business has brought in, it is easy for the business to identify any problems involving finance, and these problems can be solved.

Sales Revenue is all of the money which is coming into the business as a result of them selling their products and services, this figure is from purely sales, nothing is taken away from sales revenue. I am going to use Whitbread’s profit and loss account to show examples of sales revenue, their sales revenue for the year 2002/3 was £1,794.1m and £2,014.3m for the year 2001/2, this figure tells the business that their turnover has decreased in the past year, this could be for a variety of different reasons, of them is that the business had slightly more market share in 2001/2, however since than similar businesses have moved into the market and customers interests has been attracted towards those. Also, the business in itself may have decreased in quality, customers may not be as happy with the business as they were in the previous year and therefore have chose to visit other companies as a result of this.

The cost of sales is how much it has cost the business to make a product/service, for example, a company selling jam, their cost of sales would be how much it has cost them to produce the jars of jam, this would be the ingredients and jars. For 2001/2, the cost of sales are at a loss of £1.5480.0m, for 2002/3 they stand at a loss of £1,353.1m, therefore the cost of sales were high for the year 2001/2. Reasons for which they cost of sales decreasing could be that the business is now not...
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