Year 13 A2 Business Studies

Company accounts

Company accounts

• There are two main documents:

• Income statement (previously called profit and loss account)

• Balance sheet

Company accounts

• Legal requirements• Used by stakeholders (see handour/weebly)• Show financial strengths and weaknesses of the

company• Used to analyse the performance of company• Both based on historical data

Balance sheet is likea photograph at thatpoint

• Income statement is similar to a video recording of the previous time period

Income statement

• describes the income and expenditure of a company over a time period (usually 1 year)

• show the profit or loss made by the company (income - expenditure)

• Purposes – see handout/weebly

Income statement - Structure• Revenue / turnover / income / sales• Costs of sales / cost of goods sold• Gross profit• Expenses / overheads• +/- Exceptional items• Operating profit• Finance income• Finance costs• Profit before taxation• Taxation• Profit for year / Profit after tax• Earnings per share

• Dividends / Retained Profit

Income statement - Structure• (a) Revenue / turnover / income / sales• (b) Costs of sales / cost of goods sold• (c) Gross profit (a – b)• (d) Expenses / overheads• (e) +/- Exceptional items• (f) Operating profit (c – d) or (c – d +/- e)• (g) Finance income• (h) Finance costs• (i) Profit before taxation (f + g – h)• (j) Taxation• (k) Profit for year / Profit after tax (i – j)• Earnings per share

• Dividends / Retained Profit

How do you calculate?

• Gross profit?• Operating profit?• Profit before tax?• Profit after tax?• Earnings per share?

• See previous slides to see how you work these out

Task 1• Financial Data for F. Flintoff Limited – 31/10/09

£• Depreciation 10,000• Electricity 20,000• Gas 15,000• Cost of Sales 240,000• Rent 80,000• Salaries 25,000• Sales 500,000

• Complete an income statement for the business

Task 2• Financial Data for Chris Mass Limited – 31/12/07

£• Depreciation 5,000• Electricity 25,000• Gas 12,000• Cost of Sales 200,000• Rent 60,000• Salaries 30,000• Sales 1,500,000• Petrol 2,000• Insurance 4,000

• Complete an income statement for the business

Task 3• Financial Data for B. Piper Limited – 31/12/08

£• Wages 50,000• Electricity 25,000• Raw materials 150,000• Telephone 12,000• Rent 35,000• Taxation 20% of profit• Salaries 130,000• Marketing 250,000• Revenue 3,800,000• Insurance 3,000• Equipment hire 40,000• Finance income/costs £100,000/ £50,000

• Complete an income statement for the business