Lecture 3: Profit And Loss Statement

LECTURE 3 PROFIT AND LOSS STATEMENT BY ASSISTANT PROFESSOR NORMITA C. RAMOS PROFIT AND LOSS STATEMENT People enter the business industry primarily for profits. Profits is the difference between the amount invested and the amount gained. An INCOME STATEMENT ,also known as PROFIT AND LOSS STATEMENT is a formal report showing how much a business firm has earned or loss from its operation during a given period of time. This important statement reflects the amount of SALES, THE COST OF GOODS SOLD AND EXPENSES INCURRED IN OPERATING THE BUSINESS, AS WELL AS THE PROFIT EARNED OR LOSS INCURRED. It also shows the flow of the financial resources and net result for a period of time.(usually one year). There is a profit when the income is greater than the expenses, including cost of goods sold and there is a loss when the expenses is greater than the income. TERMS USED SALES – is the income (revenue) earned by a business from selling of goods or the rendering of services. This is the major sources of income of a business. SALES REFUND – refers to the money refunded for the goods sold and returned by the customers probably due to inferior quality and/or some defect, while SALES ALLOWANCES – is a reduction in the selling price of goods probably for same reason. PURCHASES – are goods bought for sale. It includes the invoice price as well as the incidental expenses such as transportation expenses, taxes, duties and storage costs. BEGINNING INVENTORY- is the physical count of the stock of goods on hand at the beginning of the period, while the inventory of the goods left unsold at the end of a given period is called ENDING INVENTORY. TERMS USED AVAILABLE GOODS FOR SALE -refers to the goods bought to be sold. It is the total of the beginning inventory and purchases. COST OF GOODS SOLD – is the available goods for sale less ending inventory. GROSS PROFIT – is the difference between the net sales and the cost of goods sold. NET SALES – is gross sales less sales returns and allowances. NET PROFIT – is the gross profit less the operating expenses. OPERATING EXPENSES SELLING EXPENSES – transportation, freight handling, advertisement ADMINISTRATIVE EXPENSES – salary and wages , rent MISCELLANEOUS EXPENSES EXERCISES EXERCISES MR SION ENTERPRISES HAS THE THE FOLLOWING STATEMENT OF PROFIT FOR THE MONTH OF AUGUST, GROSS SALES P209,100.00 WITH SALES RETURNS AND ALLOWANCES AMOUNTING TO P 27,100.00 . THE STOCK BEGINNING OF THE YEAR WAS P65,200.00 AND THE PURCHASES WERE p140,260.00, WHILE THE STOCK AT THE END OF THE MONTH WAS 51,350.00. TOTAL OPERATING EXPENSES WERE ADMINISTRATIVE P10,400.00, RENT P15,000.00, SELLING P3,200. PUBLICITY P800.00 , DELIVERY P 2,500. AND MISCELLANEOUS EXPENSES FOR THE MONTH OF AUGUST AMOUNTED TO P500.00. FIND THE A )NET SALES, B) TOTAL COST OF GOODS SOLD, C)GROSS PROFIT, D)TOTAL OPERATING EXPENSES E) NET PROFIT SOLUTION 2023 FORMULA NET SALES = GROSS SALES P209,100.00 LESS :SALES RETURNS AND ALLOWANCES 27,100.00 SALES REFUNDS ___________ NET SALES P 182,000.00 =========== NET PURCHASES PURCHASES P 140,260.00 ADD: TRANSPORTATION EXPENSES LESS : PURCHASE RETURNS AND ALLOWANCES, __________ NET PURCHASES P 140,260.00 ============ GOODS AVAILABLE FOR SALE MERCHANDISE INVENTORY, BEGINNING 65,200.00 ADD: NET PURCHASES 140,260.00 ____________ GOODS AVAILABLE FOR SALE P205,460.00 ============ FORMULA 4 COST OF GOODS SOLD GOODS AVAILABLE FOR SALE P 205,460.00 LESS MERCHANDISE INVENTORY, ENDING 51,350.00 COST OF GOODS SOLD P 154,110.00 ============ 5.GROSS PROFIT NET SALES P 182,000.00 COST OF GOODS SOLD GROSS PROFIT. 154,110.00 P 27,890.00 ============ 6. TOTAL OPERATING EXPENSES SELLING P ADMINISTRATIVE 25,400.00 MISCELLANEOUS TOTAL OERATING EXPENSES 6,500.00 500.00 P 32,400.00 =============== SION ENTERPRISES INCOME STATEMENT FOR THE MONTH ENDED, AUGUST 31, 2023 NET SALES P182,000.00 LESS COST OF GOODS SOLD 154,110.00 ___________ GROSS PROFIT 27,890.00 LESS :OPERATING EXPENSES 32,400.00 __________ NET LOSS (P 4,510.00) ============= PREPARE THE INCOME STATEMENT OF RAMIREZ ENTERPRISESFOR THE YEAR ENDED DECEMBER 31, 2025 GROSS SALES SALES REFUND DUE TO DEFECTIVE GOODS MERCHANDISE INVENTORY (JANUARY 1) PURCHASES PURCHASE RETURNS AND ALLOWANCES TRANSPORTATION EXPENSES MERCHANDISE INVENTORY ENDING (DECEMBER 31) OPERATING EXPENSES SELLING EXPENSES ADMINISTRATIVE EXPENSES MISCELLANEOUS EPENSES P 950,000.00 35,000.00 200,000.00 608,800.00 2,500.00 9,000.00 242,840.00 100,000.00 115,000.00 25,500.00 FIND NET SALES NET PURCHASES GOODS AVAILABLE FOR SALE COST OF GOODS SOLD GROSS PROFIT TOTAL OPERATING EXPENSES NET PROFIT References – MATHEMATICS IN A MODERN WORLD References – MATHEMATICS IN A MODERN WORLD BY ASUNCION C. DEL ROSARIO AGNES B. HERNANDEZ BUSINESS MATHEMATICS BY LETICIA P. BAUI SERGIO E. YMAS JR. ROGELIO M. HERNANDEZ MATHEMATICS IN BUSINESS LEODIGARIO SM.BAUTISTA MRYNA G.CRUZ CHRISTIE R.HILARIO JOSEPH MERCADO VICTORIA C.NAVAL