Profit and Loss Statements

Question 1

The profit and loss statement shows the ________ and _______ of a business over a period of time, and calculates the amount of ________ made

Answer 1

income, expenditure, profit

Question 2

The P&L statement is split into 3 parts:

Answer 2

• The trading account
• The profit and loss account
• The appropriation account

Question 3

What happens in the trading account (P&L statements)?

Answer 3

This is where the COGS is deducted from sales revenue to calculate gross profit.

Question 4

What happens in the profit and loss account (P&L statements)?

Answer 4

The profit and loss account deducts the business’:

• Other expenses to calculate profit before interest and tax
• Interest to calculate profit before tax
• Tax to calculate profit for the period

Question 5

What happens in the appropriations account (P&L statements)?

Answer 5

The appropriations account deducts dividends to be distributed for the period.

Profit for the period - Dividends leaves us finally with:

Retained Profit

Question 6

For NGOs in a P&L statement, the word profit is replaced by and they also do not have to pay

Answer 6

Surplus
Corporation Tax

Question 7

Why are shareholders interested in looking at the P&L statement?

Answer 7

Interested in revenues, costs and profit earned, business growth and mostly, how much dividends they will be paid.

Question 8

Why are employees interested in looking at the P&L statement?

Answer 8

Interested because they can determine potential for wage increases as well as job stability

Question 9

Why is government interested in looking at the P&L statement?

Answer 9

Used to determine how much tax is payable