Summary
Summary Business Accounts Exam Notes
- Module
- LPC - Legal Practice Course
- Institution
- LPC - Legal Practice Course
Business Accounts Exam Notes. These are the notes i used for my LPC Business Accounts Exam.
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Business Accounts (Accounts for Solicitors – Chapter 3)
Profit and Loss Account (3.3)
Profit and Loss Income – Expenses = Profit
Account o Income = Turnover i.e. money brought in before considering expenses.
o I.e. shows how much has the business brought in this year, and how much it
has expended.
o If expenses exceed income, the business has made a loss.
Distinct from assets and liabilities:
o Assets = things a business have which are worth money i.e. they bring a long-
term benefit to the business (as distinct from how much money has been
brought in this year from sales etc.)
o Liabilities - where does the business owe money (distinct from expenditure
made in the year).
Shows Only NET PROFIT = Turnover (Income) – Expenses
Income and o Expenses = expenditure where the benefit is used up quickly E.g.
Expenses NOT Advertising
Assets and Marketing
Liabilities Stationery
Wages
Utility Bills
Interest Paid
Travel
o As opposed to assets = items which will provide a long-term benefit to the
business:
Premises
Plant and machinery
Computers
Creditor
Available Cash A business’ net profit does not mean that figure is available in cash.
E.g. the business’ turnover figure will be made-up of bills that have been sent out.
However these may not all be paid by the end of the year.
Further, although assets are not categorised on the profit/loss account, money will
still have had to have been spent on purchasing assets e.g. the computer.
You should also leave a certain amount of cash in the bank as a float to meet any
upcoming bills; the profit/loss account should be adjusted to reflect these upcoming
bills as expenditure incurred in the current year.
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