The Profit & Loss Account

Profit and Loss Account

A Profit and Loss Account shows sales, purchases and expenses over a period of time.

If the value of your sales is greater than your purchases and expenses then the business has made a profit.

If purchases and expenses added together are bigger than sales then the business has made a loss.

Purchases are products bought to sell again, or parts of products that you assemble and then sell. These are your ‘Cost of Sales’.

Expenses are things like Telephone, Stationery, Computing, Car Fuel.

The example opposite is for a Limited Company with Dividends.

Retained reserves are the accumulated profits over the lifetime of the business.