1. Remember these…. Net profit Gross Profit Cost of sales Sales Overheads (animation)

2. Profit What does it mean? One sentence 2 things that affect how much you make?

3. What where the items on the board at the start? Overheads Sales Cost of Sales Net Profit Gross Profit But what do they all mean?

4. The structure of a profit and loss account 1 Top part is concerned with gross profit, e.g. £ Sales300,000 Cost of sales100,000 Gross profit200,000 Note: cost of sales is the same as ‘cost of purchases’. It is deducted from sales.

5. The structure of a profit and loss accounts 2 Second part is concerned with net profit, i.e. gross profit minus expenses. £ Gross profit200,000 Expenses Salaries55,000 Rent10,000 Other5,000 Total expenses70,000 Net profit130,000

6. Your turn! Sales Cost of sales Gross profit Expenses Salaries Rent Electricity Other Total expenses Net profit £ 68,000 12,000 5,000 £ 320,000 160,000 ?? 90,000

7. Profit and Loss Costs Revenue (Money Made) Smoothies = 50p each Costs per smoothie Yoghurt = 12p Fruit = 10p Orange = 5p Electricity = 3p Telephone = 2p Labour = 10p Calculate a profit and loss account – if I make 50 REMEMBER Difference between cost of sale and overhead/expenses!

8. Using the following financial information for Arfur Daley Plc. construct a P&L account using the appropriate format. Profit and Loss Forecasting

9. Arfur Daley’s Car Showroom Arfur Daley setup a business selling second hand cars. He forecasts his figures for next year as follows: £ Sales500,000 Cost of painting/servicing cars20,000 Cost of buying cars350,000 Rent of Showroom9,000 Rates4,800 Assistants wages5,000 Other showroom expenses7,000 Tax34,000 Dividends 25,000