We are in business to make a profit. It is important we understand how to create a profit and loss account and understand the basic principle behind the account especially if you are just starting your own business. A profit and loss account is basically total sales less total business costs. The excess of sales over your business cost is called profit. On the same note, if your business cost is more than your sales, you are making a loss.
Here is an example of a profit and loss account that comply with FRS102.
Successful Business Limited for the year ended 31 December 2021
Profit and Loss account | |||
---|---|---|---|
Note | 2021 (£) | 2020 (£) | |
Sales | 10,000,000 | 8,825,000 | |
Cost of sales | (4,650,000) | (3,892,000) | |
Gross profit | 5,350,000 | 4,933,000 | |
Administrative expenses | (1,560,778) | (678,900) | |
Operating profit | 1 | 3,789,222 | 4,254,100 |
Interest Income (receivable) | 2,876 | 1,256 | |
Interest expense (payable) | (19,320) | (10,367) | |
Profit before tax | 3,772,778 | 4,244,989 | |
Tax on profit | 2 | (755,259) | (849,806) |
Net profit for the year | 3,017,519 | 3,395,183 | |
Dividend | 0 | (10,000) | |
Retained profit | 3,017,519 | 3,385,183 | |
Retained profit brought forward | 3,385,183 | 0 | |
Retained profit carried forward | 6,402,702 | 3,385,183 |
Note 1: Operating profit is stated after charging the following:
2021 (£) | 2021 (£) | |
Depreciation of fixed assets | 3,330 | 3,850 |
Amortisation of intangible assets | 189 | 189 |
operating lease rental for buildings | 12,500 | 12,500 |
Auditor’s fee | 12,000 | 12,000 |
Note 2: Corporation tax rate at 20% (2020: 20%)
2021 (£) | 2021 (£) | |
Profit before tax | 3,772,778 | 4,244,989 |
+ Depreciation of fixed assets | 3,330 | 3,850 |
+ Amortisation of intangible assets | 189 | 189 |
Taxable profit @20% | 3,776,297 | 4,249,028 |
Tax on profit | 755,259 | 849,806 |
Definitions
1. Retained profit is the amount kept by the company after paying dividends to shareholders.
2. Retained profit brought forward is the total accumulated retained profit from previous years of trading.
3.Retained profit carried forward is the current year retained profit plus the retained profit brought forward and this amount will be the retained profit brought forward for the net accounting year.
Overview Successful Business trading results
Successful Business Limited profit and loss account tells us, the company is making a net profit of £3,017,519 in 2021 and £3,395,183 in 2020. The company has sufficient fund to distribute its profit in the form of a dividend to its shareholders if they wish.
Compulsory filings with the UK authorities
You must deliver your company accounts, confirmation statement to Companies House when they are due. In addition, you must also deliver your company accounts which include your profit and loss account together with your corporation tax return to HM Revenue and Customs.
You will receive a late filing penalty if your company accounts are filed late.
If you require help with your company accounts and confirmation statement preparation and filing, feel free to contact our accountants they would be more than happy to assist you.