Component of Financial Statement

16th January 2012 34 Mansion road Granchestor meadows Oxford Ox1 6ds Dear Mr Han , I am writing this letter to explain to you the component of your financial statement, this includes the respite sheet at 31st of March 2011 and the profit and loss depictancy for the stratum ended in 31st of March 2011 , hope you shed a b etter understanding after reading my letter. The Profit and expiration composition shows whether your ancestry concern has made profit or loss , everywhere your financial year.This too shows how much sales youve made and how much loss, it helps you accept decisions in the future and improve on your credit line. You whitethorn also witness whether you made Profit or loss weekly, monthly but unremarkably it is shows yearly. Revenue Expenditure is the money you spend on items on a day to day basis. This may vary depending on the Business type. around examples of what may be included is, Premises cost, staff costs, purchase short letter line. These atom ic number 18 the Revenue expending from your account.Rents and Rates ? 6,000 Wages and salaries ? 3,920 Advertising ? 1,500 Telephone and tender ? 190 Revenue income is the money coming into the subscriber line from performing its mundane tasks these also vary on the type of business possess. Some of the examples of revenue enhancement income within a business are sales, commission received and also rent received. The revenue incomes from your account are Sales at a cost of ? 63,850. Balance sheet this is a businesses net worth at a particular point.Balance sheet also shows the take to be of a business as it states what the business owns also cognize as assets and also known as liabilities. Capital Income is the money that is invested into the business by its owners and all new(prenominal) investors. The money is usually to set up the business, stir equipment. It is usually equipment that exit stay and be used in the business for a longitudinal point in time of se ntence an example may be Premises. The cap income of your account is a capital of ? 16,000.Capital expenditure These are used to buy capital assets that stay in the business for a long period of time some examples may be , Buildings, Machinery ,Office , Furniture and fittings. Here is the capital expenditure from your Accounts . Equipment ? 13,175 Motor Vehicles ? 2,400 The profit and loss account calculates the amount of profit that is leftfield after the cost of producing goods and service it is then deducted from the amount of sales revenue, this is mensural by sales revenue take away costs of goods that have been sold.Cost of sales is the value of stock that is used to generate the sales, the calculation for costs of goods sold is Opening stock plus purchases take away windup stock. Net profit is the money left after all the different expenses have been deducted from the gross profit and also any other income that has been added on, this is calculated by adding the Gross Profit to expenses. Fixed assets are the items that a business owns and that entrust stay for a long period of time , you may see this on a business balance wheel sheet that will include Buildings, Machinery ,Office , Furniture and fittings.These assets lose their value over a period of time, meaning that after every year the value in the balance sheet is reduced to give affair value of the asset. The intractable assets from your account are Equipment and also Motor Vehicles. Current assets ,are the items of value that are owned by a business whose value is likely to rise and alight irregularly in number or amount on a regular basis ,this also occurs every time the business makes a transaction. Current assets include Stock ? 7,400 Debtors ? 150 Cash in the cashbox ? 560 Cash in hand ? 250Current liabilities Is what is owned by a business and it should be paid back in less than one year of time the examples are creditors and also overdrafts. The current liabilities from your account are Creditors at ? -1610. Net assets This shows the total value of the entire assets take away the value of the liabilities. Net assets are calculated by Current assets plus fixed assets take away (current liabilities long term liabilities) the total of your net assets are ? 12,325. Capital employed This represents the capital investment necessary for a business to function.Consequently, it is not a measure of assets, but of capital investment stock or shares and long-term liabilities. Its the initial capital invested in the business calculated by profit and opening capital being added deduction drawings. Capital employed and net assets always have the same / touch answers. After the explanation of showing the purpose of Profit and loss account, explaining and openhanded calculations and examples I hope it helped you understand, if any questions please contact Yours sincerely.