Profit and loss account
A profit and loss account is a financial statement that summarizes the financial transactions for a business over a period in time. In reference to charitable organisations it is sometimes known as an Income and Expenditure account.
In the United Kingdom the regulation for partnerships, sole traders, charities and chartered institutes allows a degree of flexibility in the presentation of profit and loss accounts. However there is tight regulation over the presentation of limited companies, which is set out in the Companies Act 1989.
Example
A typical profit and loss account for a limited company may look similar to the one shown below.
Profit and Loss Account for the year ended date - month - year
Sales............................................................10,217,880
Cost of sales.....................................................5,468,000
_________
Gross profit......................................................4,749,880
Net Operating Expenses (see note 1)...............................2,333,605
_________
Profit on ordinary activities before taxation and interest........2,416,275
Interest payable......................................................5,250
_________
Profit on ordinary activities before taxation.....................2,411,025
Taxation..........................................................1,080,000
_________
Profit for the financial year.....................................1,331,025
Dividends Paid......................................................140,000
Dividends Proposed...................................................75,000
_________
Retained Profit for the financial year............................1,116,025
Note 1
Operating Expenses
Depreciation................1,211,426
Wages and NI..................908,110
Administration expenses.......126,390
Distribution Costs.............87,690
_______
2,333,605
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