Sadia Hussain Unit 2
P5/P7 - Profit and loss account and balance sheet
What is a profit and loss account?
‘’Profit and loss accounts show your total income and expenses, and also shows
whether your business has earned more income than it has spent on its running
costs.’’ The profit and loss account includes the details of the organisations
transactions, showing how much profit or loss the business have made by
subtracting the total of the money going out from the income; it shows the
gross profit and also the net profit. Profit and loss account helps organisations
to see how well they are doing, it shows their financial health and performance
for a period of time such as a month, year etc.
Businesses can view the profit and loss account to see if they have achieved
their goal on making a certain amount of profit, and so they are able to make
changes and improvements if the business is not doing so well such as if they
are making a loss. It also helps shareholders of the company to see how well
they are doing by viewing the P&L. Cadbury Schweppes profit and loss account
includes the sales revenue, the cost of sales and how much gross profit the
business has made. It also shows other expenses, non-trading income, net
finance costs, and profit for the year and earnings per share.
Sales
‘’In accounting, net sales refer to the operating revenues earned by a company
by selling their products or services’’ Sales are the goods sold during that
period, and show the total amount of money the company has made from the
sales. Cadbury has made a total of £6,738 million of revenue from their sales,
from selling their products ‘’from products such as Dr Pepper, Halls,
Schweppes, Trident and Cadbury Dairy Milk.’’
Costs of sales
Costs are also included in the profit and loss account. Costs of sales are the
total costs of producing the products, for Cadbury these would include costs
for the raw materials, the packaging, the production etc. Cadbury Schweppes
total cost of sales is £5,668 million, the costs of sales are taken from the total
revenue made from the sales. The costs of sales in lower than the sales
revenue, which means that the business has made more than the amount they
have spent, this shows they are performing well as they have made a profit.
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