Book-keeping

Part 2: The financial

statements of a sole trader

Chapter 8, 9, 10 and 11

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 2008 8-1

 Book-keeping
Profit and Loss account

Chapter 8

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 2008 8-2

 Purpose of trading account,
profit and loss account

Knowing
Knowingwhat
what profits
profitsare
arebeing
beingmade
madehelps
helps
businesses
businessesto
todo
do many
manythings,
things, including:
including:

-- Planning
Planningahead
ahead
--Obtaining
Obtainingloans
loansfrom
frombanks
banks
--Telling
Tellingprospective
prospectivebusiness
businesspartners
partnershow
howsuccessful
successfulthe
the
business
businessisis
--Telling
Tellingsomeone
someonewho whomay
maybebeinterested
interestedininbuying
buyingthe
the
business
businesshow
howsuccessful
successfulthe
thebusiness
businessisis
--Calculating
Calculatingthethetax
taxdue
dueon
onthe
theprofits
profits

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 8-3

 Gross profit, net profit
and capital

Sales
Sales —
— Cost
Cost of
of Goods
Goods Sold
Sold == Gross
Gross Profit
Profit

Gross
Gross Profit
Profit —
— Expenses
Expenses == Net
Net Profit
Profit

Old
Old Capital
Capital ++ Net
Net Profit
Profit == New
New Capital
Capital

= balance sheet = profit & loss account

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 8-4
 Gross profit and net profit

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 8-5

 Effect of profits on
capital account

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 8-6

 End of Chapter 8
Profit and loss account

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 2008 8-7