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TCA 5 - Interpret the contents of a trading and profit and loss account and balance sheet for a selected company

Ink plc-profit and loss account, year ending 31 december 2014 | | £m | £m | £m | | SALES REVENUE | | | 600 | | COST OF SALES (direct costs) | | | | | Raw materials | 240 | | | | Power | 0 | | | | Wages of operatives | 0 | | | | | | 240 | | | GROSS PROFIT | | | 360 | | EXPENSES (indirect costs) | | | | | Salaries (administration) | 110 | | | | Rent and rates | 40 | | | | Heating and lighting | 10 | | | | Marketing | 30 | | | | Printing and stationery | 5 | | | | Insurance | 10 | | | | Telephone | 10 | | | | Depreciation | 45 | | | | | | 260 | | | OPERATING (OR TRADING)PROFIT | | | 100 | | INTEREST ON LONG TERM LOANS | | | 10 | | NET PROFIT BEFORE TAX | | | 90 | | CORPORATION TAX | | | 10 | | NET PROFIT AFTER TAX | | | 80 | | The uses to which profit is put are shown in: | | | | | | | | | | APPROPRIATION ACCCOUNT | | | | | NET PROFIT AFTER TAX | | | 80 | | DIVIDENDS TO SHAREHOLDERS | | | 20 | | RETAINED PROFIT | | | 60 |

1. From the above: you need to explain each row of the profit and loss account. 2. What explain does sales revenue show (use figures). 3. Explain what does cost of sales show? (use figures) 4. How do we work out gross profit (what does it show?)… etc… 5. Explain what does expenses show? (figures) 6. Explain operating costs (calculation and figure) 7. Explain Interest on long term loans (show) 8. Explain Net

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