The Profit & Loss Account

A revision of the basic theory about the Profit & Loss Account.

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Sales Revenue

a.k.a. Sales turnover, income from sales

This is the money the business receives from customers in exchange for products/services.

Number of Items Sold x Selling Price. (SR = NIS x SP)

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Cost of Sales

This is the costs the business incurs in order to make the products to sell.

 Opening Stock + Purchases – Closing Stock

CoS = OS + P - CS

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Gross Profit

The Gross Profit is profit from sales once the cost of sales has been deducted.  


Sales – Cost of Sales (GP = S – CoS)

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Expenses, also known as Overheads.

Expenses are the ‘running costs’ a business has in order to make and sell the product.  This commonly includes expenses such as  wages and salaries; rents, rates and insurance; Light, heat and power; telephone and broadband.

  E+E+E+E = TE

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Net Profit

Net Profit is the profit once the expenses have been deducted.


Gross Profit – Total Expenses.


NP = GP – TE

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