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

Book-keepingBook-keepingPart 2: The financial Part 2: The financial

statements of a sole traderstatements of a sole trader

Chapter 8, 9, 10 and 11Chapter 8, 9, 10 and 11

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

Book-keepingBook-keepingProfit and Loss accountProfit and Loss account

Chapter 8Chapter 8

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

Purpose of trading account, Purpose of trading account, profit and loss accountprofit and loss account

Knowing what profits are being made helps

businesses to do many things, including:

Knowing what profits are being made helps

businesses to do many things, including:

- Planning aheadPlanning ahead- Obtaining loans from banksObtaining loans from banks- Telling prospective business partners how successful the Telling prospective business partners how successful the business isbusiness is- Telling someone who may be interested in buying theTelling someone who may be interested in buying the business how successful the business isbusiness how successful the business is- Calculating the tax due on the profitsCalculating the tax due on the profits

- Planning aheadPlanning ahead- Obtaining loans from banksObtaining loans from banks- Telling prospective business partners how successful the Telling prospective business partners how successful the business isbusiness is- Telling someone who may be interested in buying theTelling someone who may be interested in buying the business how successful the business isbusiness how successful the business is- Calculating the tax due on the profitsCalculating the tax due on the profits

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

Gross profit, net profit Gross profit, net profit and capitaland capital

= balance sheet = profit & loss account

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

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

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

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

Gross profit and net profitGross profit and net profit

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

Effect of profits on Effect of profits on capital accountcapital account

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

End of Chapter 8End of Chapter 8Profit and loss accountProfit and loss account