AS/A2 Business

Unit 5
Accounting Fundamentals
Guiding questions - What would happen
if businesses did not keep accounting
records?
- Does keeping Accounting records help
the business in any way? how?
• Cambridge Objectives:
- Understand the importance of a
business keeping financial records
for short and long term decision
making.
- Understand the process of
recording detailed accounting
records of purchases, sales and
other financial transactions.
Learning Targets:
 Understand why keeping business
accounts is so important
 Analyse the main users and uses of
business accounting records
 Identify and understand the main
components of an income statement or
Profit and Loss account.
Learning Targets:
 Understand why keeping business
accounts is so important
 Analyse the main users and uses of
business accounting records
 Identify and understand the main
components of an income statement
Key Terms
DO NOW- 6 min. Read the case extract. Mind map/bullet
your points.- page 443
Explore
 Previously you learned how to calculate and
analyse costs.
 Now try and calculate the profit made by Rashid.

Do you think Rashid made a profit in his first month

of trading? [6 marks]
 How would you try to work this out?

CALCULATE & SHARE

Read on the principals of accounting
on page 444 to 446
 Take notes on the principal of Accounting

 You will complete a CFU on principles of

accounting tomorrow.
Explanation
 Previously you learned how to calculate and
analyse costs.
 Now try and calculate the profit made by Rashid.

Do you think Rashid made a profit in his first month

of trading? [6 marks]
 How would you try to work this out?

CALCULATE & SHARE

Parts of the income statement or the
profit and loss account
Section 1- Trading Account

The trading account reveals the gross profit of the business.

Gross profit is the difference between sales revenue and the direct cost of the goods sold.

Cost of goods sold is the cost of purchasing the goods from suppliers (in case of retailing business) or the cost of producing the goods that are sold.
Parts of the income statement or the
profit and loss account
Profit and loss account
This account shows the net profit of the business.

Net profit = (Gross Profit – Expenses and Overheads) +

Income from non trading activities

Appropriation account is that part of the profit and loss

account which shows how the profit after tax is
distributed. This profit can be distributed as dividends or
can be kept in the company as retained profits.
Profit and loss account
Watch a Video
https://youtu.be/dW9qMY0odPc?t=23
Calculating gross profit ACTIVITY 30.1

 I have shared the

collaborative
document
 Insert your
response under
your name.
Calculating profit ACTIVITY 30.2

Page 447.

1 Calculate the missing values U–Z for the different types of profit
for Rodrigues Traders. [5]
2 State three stakeholders in this business who would be
interested in these profit figures. [3]
3 For each stakeholder group identified, explain
why the profits of this business are important. [9]