Professional Documents
Culture Documents
Trading Account
That part of the profit and loss account
where the cost of goods sold is
compared with the money raised by
their sale to arrive at the gross profit
This gives a view of the business in
terms of sales and viability of profit
Sales
Opening stock
Purchases
Less closing stock
Cost goods of sold
Gross profit
4
50 000
12 000
30 000
42 000
15 000
27 000
23 000
Distribution
Drawings/dividends, retained profit
Net Profit
Drawings or
dividends
Retained
profit
Or measuring loss
Turnover
Costs
Net Loss
Drawings or
dividends
Decrease in assets
10
Retained
loss
Turnover
Cost of sales (Direct costs)
Gross profit
Expenses (Overheads)
Other Costs (Depreciation)
Operating profit
Non-operating income
Interest payable
Profit on ordinary activities before
taxation/Net profit
Corporation tax
Profit after tax
Dividends
Retained profit for the period
11
950,000
525,000
425,000 Trading account
325,000
10,000
90,000
24,000
15,000
Appropriation
Account
Production wages
Material costs
Opening stock 01.01.08
Plus purchases during the year
Less closing stock 31.12.08
Cost of Sales
12
110,000
110,000
500,000
610,000
195,000
415,000
415,000
525,000
Expenses
(overheads)
325,000
Other Costs
Depreciation
10,000
335,000
13
Depreciation
Typical example
Computer 1100, life of 3 years, expected to make
50 at disposal
Depreciation (1100-50)/3 = 350 per year
14
Non-operating income
Interest payable
15
24,000
0
24,000
Loan interest
Overdraft charges
12,000
3,000
15,000
Simple Home Trader P&L Account for year ending March 31st 2008
Consultancy fees
Overheads
Depreciation
2150
Overdraft cost
80
Car expenses
1500
Other transport
550
Telephone
430
Stationary
700
Insurance
350
Net Profit
Drawings
Net profit retained in business
16
17,700
5,760
11,940
7,000
4,940
Taxable
amount for
inland
revenue
returns
17
18
Turnover
Cost of sales (Direct costs)
Gross profit
Expenses (Overheads)
Other Costs (Depreciation)
Operating profit
Non-operating income
Interest payable
Profit on ordinary activities before
taxation/Net profit
Corporation tax
Profit after tax
Dividends
Retained profit for the period
Year
525,000
10,000
99,000
46,500
34.2%
2008
2007
950,000
500,000
425,000
325,000
12,000
90,000
24,000
15,000
800,000
450,000
300,000
200,000
15,000
88,000
20,000
16,000
92,000
22,500
76,500
30,000
44,000
88,000
20,000
72,000
28,000
40,000
44.7%
25%
10.4%
37.5%
21.4%
11.5%
2006
700,000
250,000
150,000
85,000
20,000
17,000
18,000
70,000
30,000
35.7%
12.6%