Profit Loss Account example essay topic
395 words
Balance sheet - The last essential document in the financial section of the business plan is the balance sheet of the business at the beginning of the first month of trading. Balance sheets are different from profit loss accounts which show profits for a time period such as a year. Balance sheets show the state of the business at one moment in time. Balance sheet Fixed Assets lb lb premises 30,000 machinery 10,000 Other equipment 2,000 42,000 Current assets Bank 10,000 Petty cash 250 10,250 Current liabilities creditors Bank overdraft Working capital 10,250 Net Current assets 42,250 Long term liabilities loan 50,000 total 50,000 Net assets Financed by Net profit Profit and loss account - A profit and loss account is a financial statement which summarises the revenue and expenses of a business for an accounting period and shows the overall profit or loss. The profit loss account will show the sales (or turnover) of the business, the purchases made by the business and the overheads of running the business, such as admin, wages, rent paid, telephone and interest paid. Trading Balance profit loss account Sales 255,000 Opening stock 0 purchases 63,000 Closing stock 0 Cost of goods sold 63,000 Gross profit 192,000 expenses wages 50,000 electricity 2,000 Other expenses 5,000 total 57,000 Net Profit 135,000 Break even analysis - A business planning a new project is only likely to go ahead if it is eventually going to make a profit. A profit can be made when the business has broke even. (as soon as its income covers its running costs). The break even analysis tries to work out the position of output or sales where the firm just covers its total costs. There are 2 types of costs known as fixed costs and variable costs. Fixed costs are costs which stay the same and do not change with output or sales for example rent, insurance, interest rates and salaries Variable costs are costs which change with output for example raw materials, stock and wages.
Break even analysis Fixed costs Premises - 30,000 Bills (electric) - 2000 Wages - 50,000 Interest on loan - 5000 Total - lb 87,000 Variable costs Stock - 63,000 General expenses - 5000 Total - lb 68,000 Cost per product - 27 p Average price per product - lb 1.05.
