Performa of Profit and Loss Account Homework Answers
Every entrepreneur wants to keep up with the competition not only with other businesses in the market but with the self-revenue generation. Each year the company want to ascertain higher profit than the previous year by adopting new techniques, hiring talented staff and performing each task efficiently.
But, at the base level, everything needs to be recorded to determine if acquiring so and so was profitable for the firm or not. There are N number of expenses and losses and keeping an eye upon each is hard. The solution of the problem is Performa of profit and loss account homework answers which bring the profit and loss account statement at core understanding level.
Getting to the core of the subject:
The profit and loss statement is identified with many names.
- The income statement
- Statement of operations
- Income and expense statement
- Statement of financial results
The profit and loss statement is one of the most important financial statement that every public company generates with the balance sheet and cash flow statement. The statement of financial results represents the changes in finances of the company over a period. The income and expense statement differ from company to company but, follow the same format explains as bellow by Performa of profit and loss account homework answers.
After recording day to day expense and gain at the yearly net profit and net loss is calculated in the account of profit and loss. The statement of profit and loss is initiated with the trading account. Gross profit and loss come under a trading account. So, the profit and loss or income statement starts with gross profit or loss. The amount of gross profit listed under credit side and an amount of gross loss comes under debit side.
There are indirect profit and loss numbers. All the expense is written under debit, and all indirect revenue is on credit side.
After the calculation, whatever the values remain are considered as net profit and net loss. If the total of debit side exceeds the total of credit side, then it will be the net loss. And if the credit side is higher than the debit side, then the result is net profit. ‘Bottom Line’ is also a word for net profit or net loss line.
Breaking the statements in detail:
Let’s break down the sequence of the profit and loss statement.
It is not necessary for the firm to go by the rule to write the income statement. But, following a format give a better idea about the document and increases the readability. Improved readability can provide the better comprehension of data to information. As a result of that Performa of profit and loss account homework answers has come up with the sequential profit and loss statement.
Various categories of expenses:
Administrative level expenses
Administrative level costs are the expenses done in office premises. Commonly management team is responsible for this expenses.
For example, Salaries of manager, office clerk, all the stationary of office, rent of the office, electricity charges for administrative area, telephone bills and so on.
Distribution level expenses
These costs are written in the profit and loss statement after all the administrator fees are completed. Distribution is combined with the selling of goods, and both are interrelated direct or in an indirect way.
For example, traveling and delivery cost, warehouse rent, packaging cost, salaries of salespeople, cost used for sale boosting purposes like advertisements, commission, and discounts.
Every other expense
Any loss which does not fall under the categories mentioned above will be written in last part of other expenses.
So following the losses in said order eases the task of writing the profit and loss statement advises Performa of profit and loss account homework answers.
The fundamental features to know about the income and revenue statement with Performa of profit and loss account homework are:
- The statement of profit and loss determines the net result of the business at the end of financial year to determine the net benefit or loss for an entire year.
- Every indirect profit and loss are stated in the account of profit and loss for the business calculations to determine the net result correctly.
- All the numbers and expenses reported in the statement of income and revenue concern about the present year. Anything of past year should not be included in the current year of accounting. Current year payments and received profits are mentioned in the report even if they not in the form of cash.
- After the preparation of profit and loss statement, the statement should be compared with different profit and loss statement of other accounting year or period. That way it will improve the comprehension to take next step.
For example, analysis of current year gives x amount of net profit. It does not give more details or hint of future actions. But, analysis of last five statements of profit and loss statement shows different results.
- Financial analysis can create a success graph. Suppose, in year three the net value was higher and investing in so, and so the thing has reduced it by hugely. So, it is active decision not to invest in a similar thing and repeating the mistakes made in the past.
The statement of income and revenue gives every little finance importance that nothing can be ignored and record for calculations. Using Performa of profit and loss account homework answers one can easily manage the finances at home or in multi-million company with staff of hundreds of people.