Identify the main types of ACCOUNTS and their BENEFITS

PROFIT AND LOSS account - Trading performance over time, particularly the financial year. Trade AS NORMAL

All items of INCOME AND EXPENDITURE

IRRESPECTIVE of whether income received or paid (ACCRUALS concept)

NO CAPITAL expenditure but DEPRECIATION IS shown

Includes TAX and bank INTEREST

BALANCE SHEET - snapshot of financial strength at the end of an accounting period

Assets and liabilities.

Fixed, intangible fixed assets (good will, trademarks, patents lease, software) and current assets

Long term and short term liabilities

Difference between assets and liabilities = NET ASSETS or 'CAPITAL EMPLOYED' OR EQUITY or net worth

Movement in the cash position of the company during the accounting year.

Shows if payment has actually been RECEIVED

Doesn't list NON CASH ITEMS e.g depreciation

Includes purchase of fixed assets and any loans received

WHAT P&L TELLS YOU?

Is income going up/down?

How much is being received from different parts of the business?

Why are there changes eg lettings up?

Can then alter pricing, be more competitive, marketing, customer service, diversify, sit it out

Expenditure analysis - up/down, key factors eg expanding business or economical, 1-off costs eg legal, cut back expenses, change suppliers,

WHAT BALANCE SHEET TELLS YOU?

Tells you details of assets and liabilities and net assets - CAPITAL EMPLOYED. How stable organisation is - Greater capital employed = greater value

Has value increased/decreased?

Trade debt up/down, assets up/down, cash up/down,

Consider using cash to expand business, or borrow funds or sell assets or increase days to pay, debt collection, delay paying

Capital employed reflects how much business is worth - shows if investment has paid off. Increase assets and reduce liabilities.

WHAT THE CASH FLOW STATEMENT TELLS YOU?

Shows where cash is going and coming from. Carried over from past year? Reduced due to asset purchase? salaries or overheads increased?

more tax, bad debts

Actions - frequent analysis, efficiency invoice-payment process, credit control, debt collection, budgeting

	Created by Katie Shellard over 6 years ago

ARLA Level 4 - Managing your finance, Advanced Office Management

Managing your finances