Unit 2 - P5

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Interpret the contents of a trading profit and loss account and balance sheet for a selected company.
Wansbeck Motors Ltd is a limited company, there for have to submit their income statement and balance sheet to HM Revenue and Customs every year, for larger businesses this could be more often.
The Income Statement (Trading Profit And Loss Account)
I would also point out the fact that the “trading profit and loss account” is now called an income statement.
The income statement was constructed at 31ST December of 2006 and 2007, the date is very important on this statement because any time after this is constructed the income statement will become invalid as the variants in the income statement such as inventory value will change.
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The “Current Assets” section in the balance sheet states inventory (stock), receivables (debtors), and work in process or cash that is constantly flowing in and out of a firm in the normal course of its business, as cash is converted into goods and then back into cash. In accounting, any asset expected to last or be in use for less than one year is considered a current asset. In term of Wansbeck LTD they have had a decrease in current assets from 2006 to 2007 by 10,000 this is due to an increase of inventory worth by 5,000, an increase in receivables by 5,000 and finally a complete loss of 20,000 from their bank accounts.
The “Current Liabilities” section in the balance sheet states all the money owed by the business due within one year such as payables (creditors) and bank overdraft. In terms of Wansbeck LTD their current liabilities have increased by 20,000 from 2006 to 2007, this is due to an increase in payables by 10,000 and an increase in bank overdraft by 10,000, this could be due to a number of reasons the main reason would be a rise in the cost of inputs as there has also been a rise in inventory.
The “Net Current Assets” section also known as Working Capital is simply current assets minus current liabilities. In terms of Wansbeck LTD there has been a decrease in net current assets of 30,000 from 2006 to 2007, this would be due to a loss in current assets and an increase in current
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