Essay
Essay Unit 2 Business Resources P5 P6 P7
- Course
- Institution
This is an elaboration of unit 2 business resources p5 p6 p7
[Show more]
Seller
Follow
mila4
Content preview
P5. Interpret the contents of a trading and profit and loss account and balancesheet for a selected company.
In this assignment I will write a report for Donut cupcakes. I will explain all de
components of their profit and loss account and balance sheet, but first I will briefly
explain what the purpose and use of the profit and loss account and the balance
sheet are.
With a balance sheet you can reveal the financial status of your business in a specific
point in time. In the balance sheet is shown what the business owns (assets) and
how much it owes (liabilities), and the amount that has been invested in the business
(equity).
With the profit and loss account you can reveal if a business has made profit or loss
over a financial year. The profit and loss account start with a header that includes the
name of the account, the company name and the ending date of the period. The
most typical time periods that are used might be a month, a quarter or a year. The
second part shows the income or revenue for the time period. And the third part is a
list of all the expenses of the business.
The costs of goods sold are the costs that a company makes by producing or buying
the goods. To get to know the COGS a calculation is done. The calculation for costs
of goods sold = opening stock + purchases – closing stock.
The overhead section of the profit and loss account is where all the expenses are
written. The total overhead are the expenses plus the depreciation. The calculation
for total overhead = expenses + depreciation.
The gross profit is calculated by subtracting the costs of goods sold from the sales
revenue. Then you also have the Net profit, there are 2 kinds. Net profit before tax
and net profit after tax. To get the net profit before tax, you need to subtract the total
expenses from the gross profit. To calculate the net profit after tax, you need to
subtract the tax from the net profit before tax.
There are 2 different kinds of incomes and expenditures. The Revenue Income,
Expenditure and the Capital Income, Expenditure. The Revenue Income is an
income that the business obtains on a day tot day basis (sales). Revenue
Expenditure are expenses that the business spent on a day to day basis (expenses).
Capital Income is capital that the business had obtained that stay in the business for
a longer amount of time (loans, owners capital). Lastly the Capital Expenditures are
capital that the business has spent that stay in the business for a longer amount of
time (fixed assets).
BTEC Nationals in Business, Unit 2 Business Resources, Cohort 2019-2020
1
, I will now explain all the different elements of the balance sheet.
o Fixed assets
The fixed assets are all the items that a business ownsand uses for more
that one year, for example buildings, equipment, vehicles etc. the fixed
assets on the balance sheet show you the costs you made by buying the
products. The total fixed assets are calculated by adding the value of each
fixed asset together.
o Current assets
Current assets are the results if a day to day business operations. Current
assets are the items which will be gone within a year. These are: stock,
debtors, cash in bank, cash in hand. The total current assets are calculated
by adding the value of each current asset together.
o Current liabilities
Current liabilities is cash which has a shorter period of time to be paid
back.
o Long term liabilities
Long term liabilities are any type of fund which is borrowed by the business
over a longer period of time.
o Net assets
Net assets are the difference between the total assets and the total
liabilities.
o Reserves and retained earnings
The reserves and retained earnings specifically show what equity consists
of, so total equity = reserves + retained profit.
Report:
The worthiness of this company is quit good. If you subtract the current liabilities from
the current assets you get the working capital which is £8.000. Then the net assets
are in total £62.000, this is done by subtracting all the liabilities from the assets. So
the total equity of the company is £62.000. Their total net profit is also £83.800,
which makes the company even more worthiness, because they have more money.
BTEC Nationals in Business, Unit 2 Business Resources, Cohort 2019-2020
2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller mila4. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $16.59. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
50843 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now