In this assignment I will be looking at the contents of the profit and loss account and I will be explaining the meanings and reasons for those contents. In addition I will be doing the same for the balance sheet.
By law companies are expected to produce financial statements each year. These statements appear in Company Reports. There are two main financial statements:
The profit and loss account:
The profit and loss account is also known as a statement of profit and loss, an income statement or an income and expense statement. The profit and loss summarises on how much the business revenues are, their costs and expenses that has been sustained during a specific period of time which could usually be a quarter of year or a year. These summaries show how capable a business is to generate profits and handle costs.
Sales are important in a business like monsoon because it shows you how well the business is doing. As monsoon is a business that sells items such as clothes, shoes, jewellery etc. The amount that they sell is important so that they can sell stock and receive some money that can be spread out for costs and expenditures it also enables the business know if they are doing better than other competitors looking at their volume of sales. Sales are also a big part in the profit and loss account statement and also help the balance sheet numbers as well.
Cost Of sales is the accumulated total of all costs used to create a product or service, which has been sold. The cost of sales line item appears near the top of the income statement, as a subtraction from net sales. The result of this calculation is the gross margin earned by the reporting entity
Gross Profit is net sales minus the cost of goods sold. Gross profit is a company's profit before operating expenses, interest payments and taxes. Gross profit is also known as gross margin.
Net Profit represents the