Date post: | 01-Apr-2015 |
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By:
Miss Siti Norhidayah Hamid
• The profit & loss statement is a financial statement.
• It is used as the primary means of evaluating the economic performance of the business for a period of time.
• It also called:a)Profit & Loss accountb)Income statementc)Statement of revenues and expensesd)Earning statement
• Is defined as the different between the total revenue earned for a period of time and the total expenses incurred in earning the revenue for the same period of time (accounting period).
• Accounting period can be a month, 6 months or a year.
•
• are earned (or recognized) when a business sells goods and / or services to its customers, which results in an flow of assets such as cash or debtors.
• Refers to the using up of assets in earning revenues.
Revenues
Expenses (including cost)
• Sales revenue
• Interest revenue
• Commissions revenue
• Rent Revenue
• Discounts received
• Cost of good sold (cost of sales)
• Wages expense• Salaries• Discounts Allowed• Interest expense• Insurance expense• Rent expense• Electricity expense
• Postage expense• Motor expense• Legal expense• Audit fees• Accounting fees• Employees’ Provided
Fund Contributions• Repair and
maintenance• Depreciation
• Profit (P) = Revenues (R) – Expenses incurred (E)
P = R- E
When the ringgit amount of the expenses exceed the ringgit amount of the revenues, the negative profit would result, which is called a loss.
1- The Name of the business
2- The Title of the statement, “Profit and Loss Statement”
3- the time period covered by the statement
Include 3 pieces of
information:
• The body of the profit and loss statement consist of two main components, which is revenues and expenses.
• It can be presented in either of two ways, by vertical form or horizontal form.
• To inform the owner of the amount of profit that a business has made for a period of time
• To periodically submit to the department of inland revenue as the mount of taxable income to be paid
• To indicate the managers as to the profitability and efficiency of the business
• To inform potential investors who may be keen in investing in or buying up the business
• Recall- Accounting equation???ASSET = LIABILITIES + OWNERS EQUITY
Since then, P = R – E
So, A* = L* + [ OE + ( R – E ) ]
A* = L* + ( OE + P )
• Such withdrawals of cash / goods are referred to as ‘drawings’ .
• It happen when the owners take cash or goods out of the business for his personal used
• Drawings decrease both the assets of the business and the owners equity.
• What is accounting profit?
• Define revenues and expenses and give four examples of each.
• What are the purpose of calculating the profit?
Thank you……