Profit and Loss Account (Byte Size)
Businesses are created with the intention of producing wealth for their owners and profit is a measure of the wealth that has been created during a particular period. Profit is generally considered to be the most important measure of business performance and the amount of profit generated by a business is reported in a profit and loss account.
In this course, we provide an understanding of the nature, form and content of the profit and loss account which is also known as the income statement. We examine the way in which profit is measured, and the way in which basic profit and loss accounts and balance sheets are prepared from a series of business transactions.
By the end of this course, you should be able to:
- explain the nature and purpose of the profit and loss account
- set out the basic form of the profit and loss account and explain its relationship with the balance sheet
- explain the major conventions underpinning the profit and loss account
- explain the major principles involved in the measurement of profit
- prepare a profit and loss account and a balance sheet from basic transactions
- set out profit and loss statements in an appropriate form.