• 📅 Duration: It's like a diary of a business's money matters over a period of time.
• 🔥 Key Point: Shows if you're rolling in cash or crying in losses.
• 🍰 Parts
  • Trading Account
  • Profit and Loss Account
  • Appropriation Account

• Shows the difference between what you earned (sales revenue) and what it cost you.

• Formula Fun! 🧮

  • Gross profit = sales revenue - cost of sales.
  • Cost of sales = starting stock + purchases - ending stock.

  For instance, imagine you began with 500 chocolate bars. You bought 800 more, but by the end, you had 200 left. Your cost of sales: COGS = $500 + $800 - $200 = $1,100 (It's like you ate or sold 1,100 chocolate bars 🍫)

  Now, say you sold 400 of them for $10 each. Gross profit? Gross profit = $4,000 - $1,100 = $2,900. (That's a lot of chocolates!)

• Highlights profit before all those extra adult things like tax and interest.

• Extra adult things

  • Overheads (AKA indirect costs) like ads, office rent, etc.
  • Interest on loans
  • Company tax

Formula Time!

• Profit before interest & tax = Gross profit - expenses
• Profit before tax = Above profit - interest
• Profit for the period = Above profit - company tax