Trading & Profit

and Loss and

Balance Sheet
Keprone Company Limited
Understanding Financial Statements
• Trading Profit or Loss, Profit and Loss, and Balance Sheet
• Financial statements are the foundation of understanding a
company's financial health. They provide a summary of a
company's financial activities and position at a specific point in
time. There are three main financial statements: the trading or
profit and loss account, the profit and loss account, and the
balance sheet. This presentation will explain each of these
statements and how they work together to give you a complete
picture of a company's finances
Contents

01 Tr ading
02 Profit and Loss

Relationship

03 Balance Sheet
04 b e t w e e n Tr a d i n g ,
Profit and Loss, and
Balance Sheet
1
Trading
 The trading
account
Shows the profitability of the trading activities of a business
Calculated by subtracting the cost of goods sold from sales
revenue
Cost of goods sold = Opening inventory + Purchases - Closing
inventory
2
Profit and Loss
 The profit and
loss (P&L)
account
Summarizes the revenues and expenses of a business over a
period
Shows the net profit or loss of the business
Calculated by subtracting all expenses from sales revenue
Profit and Loss Statement
Revenue
To t a l i n c o m e e a r n e d f r o m s a l e s

Cost of Goods Sold

Direct costs associated with producing
goods

Gross Profit
Revenue minus cost of goods sold

Operating Expenses
Costs incurred in running the business

Net Profit
Gross profit minus operating expenses
Components of Profit and Loss Statement
Revenue
Income generated from business activities

Cost of Goods Sold

Direct costs associated with producing goods or services

Gross Profit
Revenue minus cost of goods sold

Operating Expenses
Expenses incurred in the normal course of business operations

Operating Profit
Gross profit minus operating expenses

Net Profit
Operating profit minus taxes and other expenses
3
Balance Sheet
Definition and Explanation
Assets

Resources owned by a company that have

monetary value

Liabilities

Obligations or debts that a company owes to

others

Equity

The residual interest in the assets of a company

after deducting liabilities

Balance Sheet
Equation

Assets = Liabilities + Equity

Components of Balance Sheet
Assets
Current assets, fixed
assets, and intangible
assets

Liabilities
Current liabilities and
long-term liabilities

Equity
Common stock, retained
earnings, and treasury
stock
4
Relationship between Trading,
Profit and Loss, and Balance
Sheet
Interpretation and Analysis
Tr a d i n g Profit and Loss
Buying and selling of goods Financial statement showing
and services 01 revenue, expenses, and net
income
02

06
Analysis Balance Sheet
Analyzing trends in trading, Statement of assets,
profit and loss, and balance liabilities, and equity
03
sheet can provide insights into
a company's financial health
05
04
Interpretation Relationship
Understanding the Tr a d in g affects revenue,
relationship between these which affects profit and loss,
statements is crucial for which affects equity on the
balance sheet
financial analysis
Example Format Trading Account
Example Format
P& L Account
Example Format
BALANCE SHEET
Example Format
BALANCE SHEET
Example Format
BALANCE SHEET
Question
Answer
THANK YOU
Keprone Company Ltd