The expenses your company incurred and the revenue the company earned ought to be evaluated properly. A profit and loss account should be established to enable you swift extraction of these valuable information. You should consider thoroughly concerning just how it’s most likely to function when you are intending to ensure the profit and losses rendering reasonably accurate information.
Just how Is This Computed?
The profit and losses that are produced to aid to evaluate whether the company is generating profit that is essential for its survival. This statement mainly compares all the income and expenses incurred by the company, based on accrual basis, so to better reflect the actual performance of the company for a given period of time.
Zoom into each item may be time consuming but this certainly can give you a hand if you wish to discover relationship in between your earnings and expenditures.
With these records, you are then able to determine the total amounts that you have made and also what is draining the company’s cash flow. This is a financial trouble-shooter you certainly need during your business venture as that can identify what you should do more for your business or what you should stay away from.
Determining the dividend you can Expect as a Shareholder
The profit and loss account offers a clue to you and your investors, if any, on the expected dividend in each of the financial year. This is always true because a company is prohibited from distributing dividend more than what it actually earns.
Working out the Tax Computation
The very first thing you need to compute your tax return is certainly the profit and loss account since most government only impose tax to companies that are money making. It is worth mentioning though that this is just a first step as the actual computation might require some tax adjustments as a result of discrepancies of tax reporting standard and financial reporting standard.
How do you present the Assets and Liabilities?
Your profit and loss accounts will not consist of information on your assets or liabilities as its main objective is to provide information on whether the company is making profit or suffering loss for a given period.
The assets or liabilities that your company possesses or what it owes are spelt out on a balance sheet. These items are separately recorded in this statement as it is quite intuitive that one should just look at the profit or loss if he/she needs to know the profitability of the business.
Start talking to a accounting firm in Johor Bahru if required if you intend to obtain valuable insight from the profit and loss accounts. You will absolutely need to know which detail accounts will be presented in the statement to gain a better idea of how things work.