Module 5 - Profit and loss statement
 Profit and loss statement An example of a profit and loss statement Appendix A Exercise in profit and loss statement Appendix B The difference between cash and profit

### Appendix A Exercise in profit and loss statement

Mr. Garcia decides on preparing a profit and loss statement for the first quarter of 1992. For that reason he is looking for the figures needed to do so:

1. Value of Stock

On the 1st of January Mr. Garcia counts his stocks. He has the following raw materials:

· 20 bags of cement,
· 10 m3 of sand,
· 50 kg of colorants,
· 20 m of wire,
· 1’000 tiles.

Next, Mr. Garcia checks his records to find out how much he paid for each item:

· He paid LU 80’000 for 200 bags of cement,
· He paid LU 6’000 for 12 m3 of sand,
· Each kg of colorant costs LU 100,
· 100 m of wire cost LU 5’000.

Using this information Mr. Garcia determines that it cost LU 18’000 to produce 1’000 tiles.

What is the value of Mr. Garcia’s stock on the 1st of January? To find the answer to this question, make a copy of the Stock Record Format, and use the figures given above. Below, you will find the answer.

Now, make a copy of the Profit and Loss Statement Format and enter the figure in the field “Initial Value of Stock”.

Mr. Garcia also determines the stock on the 31st of March and finds that it is LU 20’000. Please enter this figure in the field “Final Value of Stock” in the profit and loss statement.

2. Depreciation of Equipment and Workshop

 Description Value (\$) Yearly Depreciation (\$) Site/Buildings 3’000 200 Equipment 1’000 400

What is the yearly and quarterly depreciation, when the exchange rate is 100? Please enter the figure for the quarterly depreciation into the profit and loss statement in the field “Depreciation”.

3. Cash Transactions

Please prepare a cash book for Garcia’s Tile Factory. Enter the following cash transactions in the cash book and determine the transaction codes used for the profit and loss statement.

Remember: Investments and repay of loans are not expenses and, therefore, do not make part of the profit and loss statement.

· On the 1st of January there are LU 60’000 in the cash box.

· On the 5th of January Mr. Garcia buys plastic sheets for LU 5’000. The voucher number is 101.

· On the 10th of January Mr. Brown pays last year’s invoice. The amount is LU 100’000 and the invoice number is 356.

· On the 15th of January 200 bags of cement are delivered. Mr. Garcia pays LU 75’000. The invoice number is 102.

· On the 25th of January Mr. Garcia pays his workers: LU 30’000. The voucher number is 103.

· On the 3rd of February, Mr. Garcia buys office material for LU 2’000. The voucher number is 104.

· On the 7th of February, Mr. Garcia starts an advertising action in the newspaper “Daily Mail” and pays LU 18’000. The invoice number is 105.

· On the 12th of February, Mr. de Rivero fetches his tiles and pays LU 150’000. The invoice number is 106.

· On the 18th of February, Mr. Garcia pays LU 5’000 for transport. The invoice number is 107.

· On the 21st of February, new moulds are delivered. Mr. Garcia pays LU 70’000. The invoice number is 108.

· On the 25th of February, Mr. Garcia pays his workers: LU 30’000. The voucher number is 109.

· On the 28th of February, Mr. Domingues pays LU 100’000 for tiles he received. The invoice number is 110.

· On the 8th of March, 20m3 of sand are delivered. They cost LU 5’000. The invoice number is 111.

· On the 11th of March, Mr. Garcia pays for the repair of his vibrating table LU 10’000. The invoice number is 112.

· On the 1 7th of March, Mr. Garcia has to pay the water fee of LU 10’000. The invoice number is 113.

· On the 25th of March, Mr. Garcia pays his workers: LU 30’000. The voucher number is 114.

· On the 30th of March, the interest for the first quarter has to be paid: LU 15’000. The invoice number is 115.

· On the 31th of March, Mr. Garcia decides to draw LU 20’000. The voucher number is 116.

4. Profit and Loss Statement

Please prepare now the profit and loss statement for Garcia’s Tile Factory for the period from the 1st January to the 31st of March.

All the information you need to prepare the profit and loss statement is given above.

a. Stock Record

Stock Record

b. Depreciation

The total yearly depreciation is \$ 600. The quarterly depreciation is one forth of that:

quarterly depreciation = yearly depreciation / 4 = 600 LU / 4 = LU 150

With an exchange rate of 100, the quarterly depreciation is 150 x 100 = LU 15’000. This figure is entered into the profit and loss statement.

c. Cash Book

Cash Book

d. Profit and Loss Statement

Profit and loss statement