Profit and Loss

Also known as Income Statement

The final outcome at the end of the year
The total profit and loss over the year.
Shows revenue minus expenses

The profit and loss account shows how a company has traded during a particular period.
After paying dividends and tax, the remaining profit is transferred to the balance sheet and added to the shareholders funds, therefore increasing capital, a loss will reduce capital.

Turnover - The total value of all goods sold (sometimes called sales)

Operating Profit - The total cost incurred by actually running the company, raw materials, wages, rent etc
This can be broken down into more detail

Interest Paid - Any money paid in interest as a result of any borrowing
Split into short-term and long-term
an overdraft is a short-term borrowing.

Pre-tax Profit - Profit on ordinary activities before tax
This is the most quoted figures when talking about company's profits
Can include:
- directors salaries
- auditors fees
- depreciation of assets

Corporation tax - The tax it must pay on its profits
Includes basic income tax
Shareholders not liable for tax cab claim this back
The exact rate that companies pay on their profits will depend on several factors, including the proportion of profits earned overseas and various allowances that may be available.

Net Profit - This belongs to the shareholders called equity earnings

Dividend Allocation

Retained Earnings

Exceptional Items - Any extraordinary costs that have been incurred

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