Raw materials } (3) goods
Work-in-progress } held in 200
Finished goods } storage
Cash in bank 60
Total current assets 350
(4) People owed money 80
(5) Money owed to the bank 50
(6) Money owed to the government 35
Total current liabilities 165
(7) Net current assets 185
Net assets 885
(8) Money invested in the company and represented by shares
(9) Shares paying a variable dividend to shareholders 500
(10) Shares paying a fixed dividend to shareholders 300
(11) Shares held in a special fund used to pay off
creditors if the company goes into liquidation 85
1.Read text 10 using your dictionary to help with new words.
The profit and loss account
The profit and loss account is Total fixed assets 700 a statement of the amount of profit or loss a business has made in a period of time. For convenience and ease of interpretation the information is contained in three sections.
1. The trading account This includes the revenue from sales and the costs associated with producing those sales.
· Revenue - Cost of sales = Gross profit
2. The profit and loss account Payments such as interest and directors' fees are deducted from the gross profit to give net profit before tax. Tax is then deducted to give net profit after tax.
|Table 7 A profit and loss account Profit and loss account for year Total fixed assets 700 ending 30 June 2005 £000 £000 £000|
|Cost of sales|
|Wages and salaries|
|Heat and light|
|Rates, rent, insurance|
|Net profit after tax|
|Ordinary share dividend|
3. The appropriation account To appropriate means to set aside for a purpose or to make something the private property of an individual or an organization. The appropriation account tells interested parties how the business has used the net profit after tax. A company's appropriation account would include the amount distributed to shareholders, the amount transferred to general Total fixed assets 700 reserve and the retained profit. The presentation of a profit and loss account is shown in Table 7.