Hi guys,
Should the profit and loss accounts include expenses/purchases which are unpaid (creditors)?
I thought creditors were just put on the balance sheet, but now I am being told they should be put on both the P+L and BS.
I also do not understand why putting the creditors on the P+L would show a true reflection of the profitability of a business.
Thanks
there's no wimmin here?
Yes
there y'go then
creditors don't go on the P&L they're in the B/S
welcome, lots2learn eh?
You allocate to any given period, Income and Expenditure which matches that period.
Suppose you buy £1,000 of Materials in January, pay for them in February, make them into Saleable Goods in March, sell them for £2,000 in April, but get the cheque in May.
I'll start you off with the January Accounts:
DR: Stocks £1,000 CR: Creditors £1,000
In which month should you take these Balance Sheet items out of the Balance Sheet and put them into the P&L?
:)
I'll start you off with the January Accounts:
DR: Stocks 1,000 CR: Creditors 1,000
Where's your
DR: Purchases CR: Closing Stock
?Happy Crimbo Trolly :P
Like, get with it, man. "Guys" embraces both sexes if context so requires.
In message , mrt writes
Yes, but they are included in the total figures and are not itemised separately.
They are, becuase they are liabilities of the business.
No not quite. It is expenses an pruchase as a total whkich is oput oin the P&L and only the mount unpaid is shown on the BS
Because buying something and not paying for it and then not recording it in the P&L would falsely increase profit.
Since when do you receive cheque's for goods you purchased?
You need to understand double entry bookkeeping before you can produce a profit and loss account and balance sheet.
Since when do you spell "cheques" with an apostrophe? ;o)
Hmmm...you reckon the January Accounts show a £1,000 loss?
When you sell them?.
"Peter Saxton" wrote
It's not necessary (although it is useful!).
I once sat a (professional) exam which required production of P&L + BS without any mention at all of double entry bookkeeping in the course/syllabus/exam!
It is impossible to produce a P&L and BS without using double entry bookkeeping Tim, whether or not your "professional" exam "mentions" it, because those two accounts consist solely and entirely of double entry.
Maybe you "posted" a TB, Tim?
:0)
"Troy Steadman" wrote
Utter rubbish.
"Troy Steadman" wrote
"Chortle"?! The Institute's exams are no laughing matter!
"Troy Steadman" wrote
How do you think single-entry accounting systems work?
Without a Balance Sheet - try doing one and see if you can make it balance.
And there was me thinking it was all in Cash :)
Worked 'ard - got a grand - one entry, 'money in'
Spent in pub - a grand - one entry 'money out'
Where's Balance Sheet, Troy?
You just did it!
That's Dr Cash 1,000
That's Cr Cash
Balance Sheet:
Cash 0
Excess of Income of Expenditure 0
Troy is always well-balanced, he has a chip on *each* shoulder.
Fixed assets -
Current assets -
Current liabilities (290) ----- Net current liabilities (290)
Total assets less ------- current liabilities (290) ====== Capital and reserves
Net profit 710
less Drawings (1,000) ------- Proprietor's capital (290) ======
Have something to add? Share your thoughts — no account required.
Ask the community — no account required