Profit and Loss Accounts
A01 Profit and loss account:
A profit and loss account calculates the amount of gross and net profit that a business takes on an annual basis; it also outlines the loss which has occurred through the business, through necessary overheads. There are many aspects included within a profit and loss account, all of which I am going to briefly explain. It is important to have a profit and loss account within a business to enforce correct usage of the money. The company will be able to see where the business is losing money, they will then know to tighten up, trends can be highlighted and future plans can be made. It also outlines any parts of the business whereby, more money is being unnecessarily lost. The main focus of this account measure the expenditure and revenue of the business, which when calculated outline either a profit or a loss for the company for that financial year.
Large companies, private limited companies and public limited companies must submit their profit and loss account as part of government legislation; this requires the business to submit their accounts annually to Companies House and Inland Revenue to calculate corporation tax. The business would provide a profit and loss account when wanting to apply for the following: a loan from the bank, the Inland Revenue for calculating tax return for the business and strategic planning within the business.
Sales revenue/turnover:
This is the total amount of money that is taken from sales or services made within the business. For example, in regards Tesco it would be the amount of all their products that they sell in the store totalled up each year. This is extremely important in regards to a business as, the higher the sales turnover, the higher the costs in terms of buying in the stock, current assets, and the more money that is made for the business. This can vary considerably due to economic, social changes.
The sales revenue outlines the total value of goods or services sold, however, it does not
A profit and loss account calculates the amount of gross and net profit that a business takes on an annual basis; it also outlines the loss which has occurred through the business, through necessary overheads. There are many aspects included within a profit and loss account, all of which I am going to briefly explain. It is important to have a profit and loss account within a business to enforce correct usage of the money. The company will be able to see where the business is losing money, they will then know to tighten up, trends can be highlighted and future plans can be made. It also outlines any parts of the business whereby, more money is being unnecessarily lost. The main focus of this account measure the expenditure and revenue of the business, which when calculated outline either a profit or a loss for the company for that financial year.
Large companies, private limited companies and public limited companies must submit their profit and loss account as part of government legislation; this requires the business to submit their accounts annually to Companies House and Inland Revenue to calculate corporation tax. The business would provide a profit and loss account when wanting to apply for the following: a loan from the bank, the Inland Revenue for calculating tax return for the business and strategic planning within the business.
Sales revenue/turnover:
This is the total amount of money that is taken from sales or services made within the business. For example, in regards Tesco it would be the amount of all their products that they sell in the store totalled up each year. This is extremely important in regards to a business as, the higher the sales turnover, the higher the costs in terms of buying in the stock, current assets, and the more money that is made for the business. This can vary considerably due to economic, social changes.
The sales revenue outlines the total value of goods or services sold, however, it does not
Bibliography: (1) http://ar2011.tescoplc.com/overview/financial-highlights.html (2) http://www.stockopedia.co.uk/share-prices/tesco-LON:TSCO/profit_loss/ (3) http://www.tesco.com/investorInformation/report96/page22a.html