Profit & Loss and the Balance Sheet
You will be able to: Read Zeyto's Profit & Loss and Trading & profit and loss statements; Calculate gross profit, net profit and margins; Explain why the Balance Sheet balances and where the profit appears.
- Read not done yet
- Self-check: not taken not done yet
- Lesson complete not done yet
The Profit & Loss (P&L) shows what the business earned and spent in a period. The Balance Sheet shows what it owns and owes on a date. Both come from the Trial Balance, so you can build them by hand from lesson 6's figures.
Profit & Loss
- Reports, Profit & Loss adds up income and expense accounts for the dates you choose and ends in NET PROFIT. A minus figure is a loss.
- Income accounts show credits less debits, so returns reduce them. Expense accounts show debits less credits, including the cost of goods sold.
- Only posted documents count, by document date. The only filter is the period. For a month-by-month split or a branch, use P&L - Monthly.
- Rows do not open. Use P&L - Monthly or the General Ledger report to see the entries behind an amount.
The Trading & profit and loss statement shows the same business as two cards. The trading account runs from sales and stock to gross profit. The profit and loss account carries the gross figure over, adds income and takes off indirect expenses to reach net profit. Zeyto posts cost of goods sold as each sale is made, and the stock lines are worked out from the inventory ledger, so both statements show the same profit. If stock moved in some other way, a Stock adjustment row shows the difference instead of hiding it.
The Balance Sheet
Reports, Balance sheet is cumulative up to the To date. In Zeyto it puts liabilities and capital on the left and assets on the right, each by group, with a Profit & loss account line that holds the profit of earlier periods plus this period. Both sides end in the same total. The Difference tile (assets less liabilities) should be zero. Stock appears once, as Closing stock, at the foot of the assets.
| Assets | AED | Liabilities and capital | AED |
|---|---|---|---|
| Cash and bank | 60,000 | Trade payables | 28,000 |
| Trade receivables | 45,000 | VAT output | 6,000 |
| Inventory | 30,000 | Accrued expenses | 5,000 |
| Fixed assets 60,000 less depreciation 900 | 59,100 | Share capital | 100,000 |
| Prepaid expenses | 22,000 | Profit for the period | 80,100 |
| VAT input | 3,000 | ||
| Total | 219,100 | Total | 219,100 |
The equation is assets = liabilities + capital + profit: 219,100 = 39,000 + 100,000 + 80,100. If the Difference tile is not zero, a banner says so. Go back to the Trial Balance and Data health.
Keep a simple routine. Compare this month with last month, line by line. A large change in sales, cost of sales or one expense account is either a business event you can explain or an error you have just found.
Try it in the demo
- Open Reports, Profit & Loss. Type From and To for last month yourself (do not rely on FY to date) and press Run.
- Read Total income, Total expense and NET PROFIT. Work out the net margin.
- Open Balance sheet for the last day of that month. What does the Difference tile say?
- Open Financial statements (tree) and press Collapse all.
Public demo company, sign in as admin / demoAdmin123. Data refreshes nightly.
- Net profit = total income less total expense; gross profit = sales less cost of goods sold.
- The Balance Sheet balances because assets = liabilities + capital + profit.
- FY to date and This quarter are calendar-based; type fiscal dates yourself.
- Zeyto's Trading & P&L and plain P&L show the same net profit.
Check yourself
4 questions on this lesson. Not timed, not the exam, and you can try again. Score 60% or more, and read the lesson, to complete it.