Profit and loss account
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A profit and loss account is a financial statement that summarizes the financial transactions for a business over a period in time. In reference to charitable organisations it is sometimes known as an Income and Expenditure account.
In the United Kingdom the regulation for partnerships, sole traders, charities and chartered institutes allows a degree of flexibility in the presentation of profit and loss accounts. However there is tight regulation over the presentation of limited companies, which is set out in the Companies Act 1989.
Example
A typical profit and loss account for a limited company may look similar to the one shown below.
Profit and Loss Account for the year ended date - month - year Sales............................................................10,217,880 Cost of sales.....................................................5,468,000 _________ Gross profit......................................................4,749,880 Net Operating Expenses (see note 1)...............................2,333,605 _________ Profit on ordinary activities before taxation and interest........2,416,275 Interest payable......................................................5,250 _________ Profit on ordinary activities before taxation.....................2,411,025 Taxation..........................................................1,080,000 _________ Profit for the financial year.....................................1,331,025 Dividends Paid......................................................140,000 Dividends Proposed...................................................75,000 _________ Retained Profit for the financial year............................1,116,025 Note 1 Operating Expenses Depreciation................1,211,426 Wages and NI..................908,110 Administration expenses.......126,390 Distribution Costs.............87,690 _______ 2,333,605