The Sage Course Companion on Financial Accounting is an accessible introduction to the subject that will help readers to master key concepts and enhance their thinking skills in line with course requirements. It provides support on how to revise for exams and prepare for and write assessed pieces.

The Profit and Loss Account

The Profit and Loss Account

The profit and loss account

All types of business need to prepare a profit and loss account (sometimes called an income statement) at least once a year. The profit and loss account provides a statement of a company's financial performance during the course of its last financial year. Essentially the profit and loss account of a business records the sales (revenue) and expenses to determine whether a profit (i.e. sales exceeding expenses) or loss (i.e. expenses exceeding sales) has occurred.

Preparation of a Profit and Loss Account

Once a business has prepared a trial balance, the next stage is to move to the construction of a profit and loss account.

In examination questions, you will not normally be provided with the layout of a profit ...

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