scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 1,092
The Profit and Loss account does exactly what it suggests it shows the profit or loss that a business has made over a period of time usually six months or one year this is called the accounting period Once prepared the profit and lose account can be used by a number of interested parties in a number of ways it can be compared to a previous profit and loss account to see how the business is fairing Other interested parties are potential investors current investors shareholders management company accountants and inland revenue In order for the profit and loss account to make any sense to interested parties who rely on them for decision making purposes there has to be consistency in the way the items are treated without this it would be impossible to use them to compare business performance These rules are called the Accounting Standards and are set out as the Statement of Standard Accounting Practice SSAP and recently as Financial Reporting Standards FRS Together these statements bring about consistency for the reliability of the financial results that they report on Without these standards being set out it would be very difficult to regulate the profit and loss account For example how stock is valued which is set out in SSAP9 which states that stocks must be valued at the lower of cost and net realisable value Costs must include all expenditure which has been included in bringing the product or service to its present location and conclusion The method used must provide the fairest possible approximation to actual expenditure incurred If closing stock value is increased then the gross and net profit increases current asset value increases and therefore the total value of the whole company appears to increase There are various methods for valuing stock due to the many varying businesses and they can produce a very different profit and loss account depending on which
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA