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How to shade picture in the Profit and Loss Statement

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in this video youll learn whats an income statement is Ill show you what it looks like and how you can use it to measure a businesss financial performance hey there welcome back to accounting stuff Im James and in todays video were going to cover the income statement also known as the profit and loss statement or the PL for short this is one of the three major financial statements in accounting along with a balance sheet and the cash flow statement collectively these reports give us an impression of the businesss financial health so its important that we understand how they work Ive already made videos covering the balance sheet and the cash flow statement which you can find linked up here and down below in the description but up until now I havent posted a video yet on the income statement and Ive received a lot of requests from you guys to cover this topic so thanks for all these particularly from one subscriber so Nili if youre watching this video goes out to you good

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What do you include in a profit and loss statement?

Key Takeaways. A PL statement shows a companys revenues and expenses related to running the business, such as rent, cost of goods sold, freight, and payroll. Each entry on a PL statement provides insight into how much money a company made and spent.

How do you treat drawings in profit and loss account?

Drawings: Drawings are not the expenses of the firm. Hence, debit it to the Capital a/c and not to the Profit and loss a/c.

Are drawings treated as an expense?

Drawings from business accounts may involve the owner taking cash or goods out of the business but it is not categorised as an ordinary business expense. It is also not treated as a liability, despite involving a withdrawal from the company account, because this is offset against the owners liability.

How do you comment on a profit and loss statement?

Use these seven steps to help you read and analyze a PL report: Define the revenue. Understand the expenses. Calculate the gross margin. Calculate the operating income. Use budget vs. Check the year-over-year (YoY) Determine net profit.

How do you treat drawings in accounting?

The drawing account is represented on a balance sheet as a contra-equity account, and is shown as a reduction on the equity side of the balance sheet to represent a deduction of total equity/total capital from the business.

Are drawings deducted from profit?

The drawings are a withdrawal of capital from the business and dont affect the computation of profit, the only exception to this is if the partnership agreement provides for interest on drawings. The amounts taken are recorded in a drawings account within the accounting records.

What appears in the statement of profit and loss?

A profit and loss (PL) statement, also known as an income statement, is a financial statement that summarizes the revenues, costs, expenses, and profits/losses of a company during a specified period. These records provide information about a companys ability to generate revenues, manage costs, and make profits.

Where does interest on drawings go in profit and loss account?

Interest on drawings will be shown on the credit side of the profit and loss appropriation account. Interest on drawings is the interest charged by the firm on the drawings made by the partners. It is a source of income for the firm and hence, it is to be credited to profit and loss appropriation account.

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