Profit and Loss Accounts

Question	Answer
What is profit and how does it differ from cash?	Cash is physical Profit is long term
What is profit?	Total revenue - total costs
Types of profit	Gross profit Operating profit Net profit
Gross profit	Revenue - variable costs Gross profit refers to profit made after fixed/direct costs are met
Operating profit	gross profit - overheads
Net profit	operating profit - interest and exceptional costs Net profit could be calculated before and after subtraction of taxes
What is profit and loss account?	- aka statement of comprehensive income - financial performance of past 12 months - seen in business plan - comparisons can be made
Profit and loss account and cash flow forecast	The difference between this and a CFF is simply the detail in document for instance tax is often considered and profits are calculated
Why is it a good idea to calculate profit/loss?	- shows financial health - avoid failure - record of incomes - compare trades - legal requirement - LTD are required to publish this account - can look at how to generate higher profits
Calculate profit and loss accounts	Percentage changes in profit = (current years profit - previous years profit / previous years profit) x 100

Resource summary

	Created by Charlotte Summerly over 8 years ago