P5 – Interpret the contents of a trading and profit and loss account and balance sheet for
a selected company
What is a trading and profit and loss account and balance sheet?
A trading and profit and loss account is usually in the form of a spreadsheet and shows how
much money the business has made in a specific period of time, it includes the revenues,
costs and expenses incurred during the specified period of time. The profit and loss account
is used (purpose and use) by a bank or other lender to see if the business is worth investing
in, they can also be used by Tesco to predict the future profits and losses of the business to
help them plan their future finances, below is the trading and profit and loss account of
Tesco from 2014-2015. The performance (measure of trading performance) of Tesco can be
tracked using the profit and loss account, we can see the revenue, the gross profit and then
the net profit (which is the turnover with all the expenditure and other sources of income
that are not from normal operations). The profit and loss account below (establishing profit
figures) shows that Tesco made £2,122 million gross profit and £5,766 million in overall
profit (after tax) in 2015.
Trading and profit and loss account, from 2014-2015
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