By: Miss Siti Norhidayah Hamid. The profit & loss statement is a financial statement. It is used as the primary means of evaluating the economic performance.

By:

Miss Siti Norhidayah Hamid

• The profit & loss statement is a financial statement.

• It is used as the primary means of evaluating the economic performance of the business for a period of time.

• It also called:a)Profit & Loss accountb)Income statementc)Statement of revenues and expensesd)Earning statement

• Is defined as the different between the total revenue earned for a period of time and the total expenses incurred in earning the revenue for the same period of time (accounting period).

• Accounting period can be a month, 6 months or a year.

•

• are earned (or recognized) when a business sells goods and / or services to its customers, which results in an flow of assets such as cash or debtors.

• Refers to the using up of assets in earning revenues.

Revenues

Expenses (including cost)

• Sales revenue

• Interest revenue

• Commissions revenue

• Rent Revenue

• Discounts received

• Cost of good sold (cost of sales)

• Wages expense• Salaries• Discounts Allowed• Interest expense• Insurance expense• Rent expense• Electricity expense

• Postage expense• Motor expense• Legal expense• Audit fees• Accounting fees• Employees’ Provided

Fund Contributions• Repair and

maintenance• Depreciation

• Profit (P) = Revenues (R) – Expenses incurred (E)

P = R- E

When the ringgit amount of the expenses exceed the ringgit amount of the revenues, the negative profit would result, which is called a loss.

1- The Name of the business

2- The Title of the statement, “Profit and Loss Statement”

3- the time period covered by the statement

Include 3 pieces of

information:

• The body of the profit and loss statement consist of two main components, which is revenues and expenses.

• It can be presented in either of two ways, by vertical form or horizontal form.

• To inform the owner of the amount of profit that a business has made for a period of time

• To periodically submit to the department of inland revenue as the mount of taxable income to be paid

• To indicate the managers as to the profitability and efficiency of the business

• To inform potential investors who may be keen in investing in or buying up the business

• Recall- Accounting equation???ASSET = LIABILITIES + OWNERS EQUITY

Since then, P = R – E

So, A* = L* + [ OE + ( R – E ) ]

A* = L* + ( OE + P )

• Such withdrawals of cash / goods are referred to as ‘drawings’ .

• It happen when the owners take cash or goods out of the business for his personal used

• Drawings decrease both the assets of the business and the owners equity.

• What is accounting profit?

• Define revenues and expenses and give four examples of each.

• What are the purpose of calculating the profit?

Thank you……