Confused trying to work out a profit and loss

[matt_uk]

Hello,

I am working on a busines plan and I am struggling with my profit and loss.

The reason being is that I have re-invested almost all the profit into new stock, and I cant get my head around it.

Please can anyone help?

I have the situation where my sales is lower than my cost of sales as I have it all tied up in new stock.

For example:

Sales: 6500
Cost of sales: 7000

Gross profit: -500

Overheads: 500

Net Profit: -1000

Drawings: 1000

Retained profit: -2000

But lets say for instance that the cost of sales of £7,000 was mostly on new stock.

Ive tried to work out stock movement and have this as an example:

Opening stock: 1500
Stock purchased: 5500
Total available for sale: 7000
Stock Check: 3000
Amount sold: 4000

I just cant work out how to incorporate this into the P&L?

Can anyone help?

[accountancyextra]

You need to adjust for your closing stock - i.e. the amount of stock on hand at the end of the period you are reviewing.

The only stock costs (purchases) that go in the P&L during a period are those for goods which have been sold.

[BusinessIdeas]

What you need:
Your accounting period for the year, an example would be: 01/04/2008 to 31/03/2009

The figures you need:
Sales: The total amount of sales you have made in a year, an example would be: £15,000
Stock Purchases: The amount you have paid for your stock in a year, an example would be: £8,000
Opening Stock: The value at cost of the stock you hold at the beginning of the year, this would normally be £0 in your first year of trading.
Closing Stock: The value at cost of the stock you are holding at the end of the year, an example would be £1,000
Expenses: The running expenses that you paid for, like telephone, petrol, rent and rates etc, an example would be £4,000

To do a very simple P&L for the year would just involve the calculation:
Sales £15,000 minus (Stock Purchases £8,000 plus Opening Stock £0 minus Closing Stock* £1,000) = (£7,000) Gross Profit = £8,000
Gross Profit £8,000 minus Expenses £4,000 = Net Profit £4,000 -
This is the amount you would pay tax on.
*Your Closing Stock from the previous year would be your Opening Stock for the following year.

*note: This example is just a guide on some of the basic principles involved. It is not intended to supplant a full financial statement, neither does it cover VAT or other eventualities such as depreciation or loan interest etc.

[elainec100@cheapaccounting]

Sales: 6500
Cost of sales: 4000

Gross profit: 2500
Overheads: 500

Net Profit 2000

Drawings: 1000

Retained profit: 1000

[MyAccountantOnline]

What you have to remember is that your cost of sales must only be the cost of the sales you have made, this is why you take out the unsold (closing) stock.

[davezzr]

are you saying that your account shows minus £2000, with £3000 in retained stock . if so your closing account would be minus £2000 and your new opening balance would show your stock

[weweavewebs]

opening stock + purchases - closing stock = cost of sales

your closing stock will also show in balance sheet as an asset thus improving the companys financial position.

Sales 6500
your example:
Opening stock: 1500
Stock purchased: +5500
Stock Check or closing stock -3000
Amount sold or cost of sales: 4000

Gross profit 1500

[weweavewebs]

gross profit________1500
overhead__________-500
net profit__________1000
drawings__________-1000

Retained earnings____0

[Williams lester]

opening stock + purchases - closing stock = cost of sales

your closing stock will also show in balance sheet as an asset thus improving the companys financial position.

Sales 6500
your example:
Opening stock: 1500
Stock purchased: +5500
Stock Check or closing stock -3000
Amount sold or cost of sales: 4000

Gross profit 1500

Lets hope you have an accountant too, as your figures don't add up!

[elainec100@cheapaccounting]

opening stock + purchases - closing stock = cost of sales

your closing stock will also show in balance sheet as an asset thus improving the companys financial position.

Sales 6500
your example:
Opening stock: 1500
Stock purchased: +5500
Stock Check or closing stock -3000
Amount sold or cost of sales: 4000

Gross profit 1500

6500-4000=1500 :|:|:|
don't give up your day job!!!

[weweavewebs]

let me try again, it was a bit light in night, lol

Sales_______________________________6500

Opening stock:_______________1500
Stock purchased:____________+5500
Stock Check or closing stock __-3000
Amount sold or cost of sales:__________4000

gross profit_________________________2500

overhead__________________________-500
net profit__________________________2000
drawings__________________________-1000

Retained earnings___________________1000

[elainec100@cheapaccounting]

so that would be the same as I posted above :D:D:D

[David Griffiths]

so that would be the same as I posted above :D:D:D

And you did it cheaper! :D

[elainec100@cheapaccounting]

And you did it cheaper! :D

yes 'cause I git it right first time :D:D:D:D

[davezzr]

with accounting like that id need two books, one for me(the right one) and the other you can do for me for the tax man....luvly jubly:D:D:D