Component of Financial Statement

Topics: Generally Accepted Accounting Principles, Income statement, Balance sheet Pages: 3 (817 words) Published: April 23, 2013
16th January 2012

34 Mansion road
Granchestor meadows
Ox1 6ds

Dear Mr Han ,

I am writing this letter to explain to you the component of your financial statement, this includes the Balance sheet at 31st of March 2011 and the profit and loss account for the year ended in 31st of March 2011 , hope you have a b etter understanding after reading my letter.

The Profit and Loss account shows whether your business has made profit or loss , over your financial year. This also shows how much sales you’ve made and how much loss, it helps you make decisions in the future and improve on your business. You may also view whether you made Profit or loss weekly, monthly but usually it is shows yearly.

Revenue Expenditure is the money you spend on items on a day to day basis. This may vary depending on the Business type. Some examples of what may be included is, Premises costs, staff costs, purchase stock. These are the Revenue expenditure from your account.

Rents and Rates - £6,000
Wages and salaries - £3,920
Advertising - £1,500
Telephone and postage - £190

Revenue income is the money coming into the business from performing its daily tasks; these also vary on the type of business owned. Some of the examples of revenue income within a business are sales, commission received and also rent received. The revenue incomes from your account are Sales at a cost of £63,850.

Balance sheet this is a businesses’ net worth at a particular point. Balance sheet also shows the value of a business as it states what the business owns also known as assets and also known as liabilities.

Capital Income is the money that is invested into the business by its owners and all other investors. The money is usually to set up the business, have equipment. It is usually equipment that will stay and be used in the business for a longer period of time an example may be Premises. The capital income of your account is a capital of £16,000.

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