63 Profit Loss
COSTS AND COSTING 6
6.3
PROFIT AND LOSS
AND BALANCE SHEETS
. Simple Financial Calculations
. Analysing Performance - The Balance Sheet
. Analysing Performance
. Analysing Financial Performance
. Profit And Loss Forecast
. Profit And Loss Calculations
. The Balance Sheet Exercise
P 213
. Your books tell you what's happened in the past.
. Your cash flow forecast is about what may happen in the future.
. What about now? How are we doing right now?
For every single bit of goods or services you supply to others, there will be costs to pay
(money going out) and money coming in from the sales you make. If there’s more coming in than going out, then you should be making a profit. Let’s look at working that out:
Sales
. Wouldn't it be nice to know if you were making a profit?
This includes everything you’ve supplied, even if not paid for yet! It is your usual trade. It does not include sale of assets.
If you supply goods, you need to know how much stock you’ve purchased, and how much stock is left. (In a service trade, you won’t.) This is known as the ’cost of sales’.
Cost of sales is:
Value of stock at start of time period
+
Value of stock bought in this period
=
Total stock available to be sold
Value of stock left at end of period
=
Cost of sales for the time period
P 214
PROFIT AND LOSS AND BALANCE SHEETS 6.3
SIMPLE FINANCIAL
CALCULATIONS
Cost of sales is:
Calculating Gross Profits
Sales - Cost of sales
= Gross profit
Opening stock + Purchases - Closing stock
= Costs of sales
Value of stock (raw materials)
+
Materials bought in this time
Gross profit / Sales x 100
= Gross profit margin (%)
Value of stock at end of time
+
Direct costs related to production
(wages, power etc)
+
Work in progress
+
Value of products at start of period
Value of products at end of period
=
Costs of production/cost of sales for period
Don't forget: your stock of raw materials is valued at what you paid for them, even if that is more or less than what you could get for them.
6.3
PROFIT AND LOSS
AND BALANCE SHEETS
. Simple Financial Calculations
. Analysing Performance - The Balance Sheet
. Analysing Performance
. Analysing Financial Performance
. Profit And Loss Forecast
. Profit And Loss Calculations
. The Balance Sheet Exercise
P 213
. Your books tell you what's happened in the past.
. Your cash flow forecast is about what may happen in the future.
. What about now? How are we doing right now?
For every single bit of goods or services you supply to others, there will be costs to pay
(money going out) and money coming in from the sales you make. If there’s more coming in than going out, then you should be making a profit. Let’s look at working that out:
Sales
. Wouldn't it be nice to know if you were making a profit?
This includes everything you’ve supplied, even if not paid for yet! It is your usual trade. It does not include sale of assets.
If you supply goods, you need to know how much stock you’ve purchased, and how much stock is left. (In a service trade, you won’t.) This is known as the ’cost of sales’.
Cost of sales is:
Value of stock at start of time period
+
Value of stock bought in this period
=
Total stock available to be sold
Value of stock left at end of period
=
Cost of sales for the time period
P 214
PROFIT AND LOSS AND BALANCE SHEETS 6.3
SIMPLE FINANCIAL
CALCULATIONS
Cost of sales is:
Calculating Gross Profits
Sales - Cost of sales
= Gross profit
Opening stock + Purchases - Closing stock
= Costs of sales
Value of stock (raw materials)
+
Materials bought in this time
Gross profit / Sales x 100
= Gross profit margin (%)
Value of stock at end of time
+
Direct costs related to production
(wages, power etc)
+
Work in progress
+
Value of products at start of period
Value of products at end of period
=
Costs of production/cost of sales for period
Don't forget: your stock of raw materials is valued at what you paid for them, even if that is more or less than what you could get for them.