SAMPLE PROFIT & LOSS
Sample profit & loss statement A Profit & Loss Statement (P&L) measures the activity of a business over a period of time – usually a month, a quarter, or a year. This financial report may have several different names: profit & loss, P&L, income statement, statement of revenues and expenses, or even the operating statement. The P&L basically tells you revenue, expenses, profit, and loss. Keep in mind that in almost all circumstances, profit is not the same thing as cash flow. The basic formula for the profit-and-loss statement is: Revenues – expenses = net profit. P&L statements generally follow this format: Revenues – Operating (variable) expenses = Gross profit (operating) margin – Overhead (fixed expenses) = Operating income +/– Other income or expense (non-operating) = Pre-tax income – Income taxes = Net income (after taxes) Here are definitions of these categories: Revenue is the money you receive in payment for your products or services. Operating, or variable, expenses are the expenses that rise or fall based on your sales volume. Gross profit margin or operating margin is the amount left when you subtract operating expenses from revenues. Overhead, or fixed, expenses are costs that don’t vary much month-to-month and don’t rise or fall with the number of sales you make. Examples might include salaries of office staff, rent, or insurance. Operating income is income after deducting operating and overhead expense. Other income or expenses (non-operating) generally don’t relate to the operating side of the business, rather to how the management finances the business. Other income might include interest or dividends from company investments, for example. Other expenses might include interest paid on loans. Pre-tax income is income before federal and state governments take their share. Income taxes How income tax is shown on the P&L varies based on the type of legal entity. For example, a C corporation almost always shows income tax expense, but S corporations, partnerships, LLCs, and sole proprietorships rarely show income tax expense on the P&L. Net income (after taxes) is the final amount on most profit-and-loss statements. It represents the net total profit earned by the business during the period, above and beyond all related costs and expenses. Here’s a simple example of a Profit & Loss Statement: Sample Company, Inc. Sample Profit & Loss Statement August 1-31, 2010 Operating Revenue Product sales$12,000 Service sales$3,000 Total Operating Revenue$15,000 Operating Expenses Cost of goods sold$7,000 Gross Profit$8,000 Overhead Rent$1,500 Insurance$250 Office supplies$150 Utilities$100 Total Overhead$2,000 Operating Income$6,000 Other Income (Expenses) Loan interest($500) Earnings Before Income Taxes$5,500 Income Taxes$500 Net Earnings$5,000 Manage your business expenses Categorize expenses Create a review schedule Establish goals The consequences of a smaller company spending too much are far greater than for larger companies. If you own a small business it’s especially important to control expenses. Here are some tips for taking an organized, logical approach to managing your expenses: Categorize your expenses as short-term, long-term or fixed. What’s the difference between the three? Short-term items are things like wages for part-time and seasonal workers, because these may change within a six-month period. Long-term expenses are items such as leases and contracts with vendors, which may last up to a year. Fixed costs, such as mortgage payments, rarely change. After categorizing your expenses, rank them in descending order of cost within each group. This process will help you see more clearly where your money is going. Create a schedule to review the items in each expense category. Look at your short-term expenses more frequently than your long-term costs because you can make changes to these more easily. If you are successful cutting costs in one area, see if you can transfer your strategy to another area of your business. Establish goals for reducing each expense category by a manageable percentage. If you have employees, assign someone to meet each cost-cutting goal, or consider rewarding employees for finding ways to cut costs.
Accounts - financial statement analysis
Financial statement analysis is the process of reviewing and analyzing a company's financial statements to make better economic decisions to earn income in future. These statements include the income statement, balance sheet, statement of cash flows, notes to accounts and a statement of changes in equity.
Accounts - Ratio Analysis
Ratio analysis is the comparison of line items in the financial statements of a business. Ratio analysis is used to evaluate a number of issues with an entity, such as its liquidity, efficiency of operations, and profitability. ... Trend lines can also be used to estimate the direction of future ratio performance.
Accounts - Cost Accounting
Cost accounting is defined as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, classifying, allocating, aggregating and reporting such costs and comparing them with standard costs." (IMA). Often considered a subset of managerial accounting, its end goal is to advise the management on how to optimize business practices and processes based on cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.
what is Practical,Normal ,Maximum ,Actual ,Idle capacity ? capacity of a firm in details
Practical Capacity :It refers to the production capacity of a firm taking into consideration various internal and external factors within which the firm operates .Normal capacity :It refers to the production capacity of a firm at which the firm can operate in normal situationMaximum capacity :It refers to the capacity at which the firm can operate using all the factors of production to fullest extent . in the capacity beyond which the firm can't produce more . A firm can't operate at this capacity for a long period .It causes damage to machine .In emergent situation this capacity is used .Actual capacity : It refers to the production capacity of a firm at which the firm producing at present .It may any capacity from start to maximum .Usually the firm operate at normal capacity .Idle capacity :It refers to the capacity which remains idle in other word the capacity which remains unused .The reasons for such idle capacity is shortage of material , machine brokedown , power failure , waiting for instruction etc .Idle capacity = Normal capacity -Actual capacity
Method of Costing
METHOD OF COSTING MEANING: There are various method or type of costing , but the basic principal underlying all these methods or type are the same .The basic principal are to collect and analyse the expenditure according to elements of cost and to determine the cost for each cost center or cost unit . The nature of the manufacturing operation carried out of the nature of the services rendered by a concern decides the method applicable to it . Broadly speaking , there are three main method of costing ---1. job costing , process costing , and farm costing , the other are either variants of these three method or are techniques use for a particular purpose under particular condition . METHOD OF COSTING 1. JOB COSTING 2. PROCESS COSTING 3. FARM COSTING 1. JOB COSTING : Under this method , the cost unit is taken to be a job ,small or big , comparison of a definite quantity of a product manufactured . So , the approach is product approach . Job costing system is used where it is desired to ascertain the cost of a job or a specific order or of a batch of finished goods and also profit or loss each such job . Thus , painters , publisher , machine tool manufacturers , caterers , job foundries , builders etc . use job costing system . 2. PROCESS COSTING : Process represents type of costing for continuous and mass production industry . In such industry output consists of like unit each unit being process in same manner . Therefore it is assumed that all same amount of material , labour and overhead is chargable to each unit processed . cost are assumulated on the process basic records of unit product are variable . 3. FARM COSTING : The agriculture farms are quite different from the manufacturing industry in many respect . Manufacturing industry used standard plants which gives standard output .Plant of a farm is highly influenced by climate , rainfall , nature of manuring , nature of labour used at different stages from showing to harvesting , nature of seeds used etc . Manufacturing product are not influenced by these factors . Another peculiarity of a farm is that output of a period in part at least , is used as the input of the period following . paddy potato ,onion etc . produced in one year are preserved for using them as seeds in the next year.