Profit and Loss Essay

A usefulness and loss account is something agate linees use to bespeak them their revenue, cost and profits for that certain course of study, therefore fork uping the total f only of profit that the business has do that year, it is extremely entailmentant for the business, in limited for the accounts department who entrust refer to the profit and loss account a lot. This is because it clearly lays surface what the business has spent, and what the business has brought in, it is easy for the business to draw any problems involving finance, and these problems can be solved.Sales Revenue is all of the cash which is coming into the business as a result of them selling their products and services, this watch is from purely gross revenue, nonhing is taken away from gross gross revenue revenue. I am going to use Whitbreads profit and loss account to show examples of gross gross revenue revenue, their sales revenue for the year 2002/3 was 1,794.1m and 2,014.3m for the year 20 01/2, this mannikin tells the business that their turn over has decreased in the past year, this could be for a variety of different reasons, of them is that the business had slenderly more market section in 2001/2, and since than similar businesses hold up moved into the market and customers interests has been attracted towards those. Also, the business in itself whitethorn have decreased in quality, customers may non be as happy with the business as they were in the previous year and therefore have chose to visit other companies as a result of this.The cost of sales is how a lot it has cost the business to key out a product/service, for example, a company selling jam, their cost of sales would be how more it has cost them to experience the jars of jam, this would be the ingredients and jars. For 2001/2, the cost of sales ar at a loss of 1.5480.0m, for 2002/3 they stand at a loss of 1,353.1m, therefore the cost of sales were high for the year 2001/2. Reasons for which th ey cost of sales decreasing could be that the business is now not wasting as many raw materials and only using what they need. Whitbreads cost of sales could be paying suppliers of places such as yeoman of the guards for the products which they produce.Raw materials are materials which the business uses in order to produce a product, for example, a Pizza shop will need to import raw materials such as flour, cheese, tomatoes and pepperoni, these raw materials are they created into a sunk product, in this case, the pizza.Opening and closing stock is to do with stock and the financial year, how much stock the company has at the start of their financial year, and how much they have at the end, this way the business can look at how successful a product has been throughout the year.Expenditure in a business is what it is costing them to keep the business running, without these things the business would not be able to keep running, these are cognise as ongoing costs. in that location a re a gargantuan variety of expenditure costs, for example-employee costs -repairs -interest -administration -distribution costs -etcLooking at Whitbreads accounts, in 2001/2, their expenditure was 389.9m and for 2002/3 was 203.9m. In 2001, Whitbreads spent 25m on restructuring costs, meaning this bills was spent on ways ti improve the business, tender applied science may have been purchased so the business does not need to authorize money on other expenses.Depreciation is when an asset, for example a car, loses cherish over time, a car bought in 2001, will be expenditure less in 2002, this is because new models will have been launched and therefore customers will prefer these. On the profit and loss account, depreciation is put under expenses. In 2001/2 deprecation for Whitbreads was 3.9m, and for 2002/3 was 7.8m. Therefore depreciation was much high during 2002/3, the reason for this is plausibly the fact that during the restriction stages, the company has purchased new te chnology which has now decreased in valueTaxation is known as the corporation tax which has to be paid by all limited companies, it is taken from their profits, and is usually a cut of them, this goes is paid to the government, ostensibly every companys taxation is different. Whitbreads taxation in 2001/2 was 59.4m, for the year 2002/3 it stands at 50.0m., therefore taxsation was around 5.9.4m higher(prenominal) in 2001/2, this is because this year the business had a slightly higher sales turnover, meaning the taxation is higher.Gross profit is all profit make from the business, including what it has cost the business to keep running i.e. expenses.. This means that gorss profit is sales revenue, minus cost of sales, this purpose creates gross profit.Sales Revenue apostrophize of sales = Gross ProfitGross profit during 2001/2 stands at 466.3m, and for the year 2002/3 are 441.0m. This tells us that gross profit was slightly higher in 2001/2, this is because there was a different n umber of sales in this year that the other. However, the gross profit figure may too be different because the company is not bringing in as many sales as in other years. The business mustiness be aware that the gross profit is not a straightforward indication of their current performance because it does not take into account last profit is the businesses total profit for that financial year, in order to figure out the net profit, the business must first work out the gross profit, then take away business expenses, giving the last profit figure. For the year 2001/2, the net profit was a loss of 52.4m, however in 2002/3 the businesses net profit was 152.8m, meaning the business made a higher net profit in 2002/3. The reason for this is probably the fact that the business under went a lot of reconstruction. The net profit gives Whitbreads a clear indication on how they are performing as a company.Looking at Whitbreads accounts, I would sound out that as a business, they have clearl y made excellent improvements since their reconstruction, they have gone from making a large loss, to making a large profit in just a year. Therefore I would contumaciously invest in Whitbreads, however I would prefer to see the accounts of Whitbread over the next few years to make sure customers havent lost interest, in a few years time, Whitbreads may need to make more improvements to its business to make sure they are keeping up to date.