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Level 3 Business Unit 2 Assignment 1

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Submitted By jakenaylor10
Words 3798
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Task 1

A business keeps various types of financial record to monitor its performance and ensure that taxes are paid. These include cash flow statements, profit and loss accounts and a balance sheet.
Profit and Loss Account

A trading, profit and loss account shows the business's financial performance over a given time period, e.g. one year. The sales on the profit and loss account are the revenue that the business is receiving from selling products or services which was £187,730. The cost of sales then needs to be calculated in order to generate a gross profit figure. Cost of sales is the money that is needed to provide products or services to customers which was £83,000 in this scenario. The trading account shows The Craft & Pottery Shop & Studio LTD has made a gross profit of £105,785 before taking into account other expenses such as overheads. Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. The profit and loss account shows a net profit of £18,865 has been made. Net profit is the amount of ‘true profit’ a business makes after deducting the expenses of the business off the gross profit figure.

Balance Sheet
A balance sheet shows the value of a business on a particular date. A balance sheet shows what the business owns and owes (its assets and its liabilities). Fixed assets show the current value of major purchases that help in the running of the business, like delivery vans or PCs. In this case £19,600 of fixed assets is owned. Current assets show the cash or near-cash available to the firm. This includes stock ready to sell, money owed to them by debtors and cash in the bank. There are £31,692 worth of current assets.
Deducting all the current liabilities from the total amount of fixed and current assets gives the value

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