P5- Profit and Loss
Profit and Loss sheet-
“A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time - usually a fiscal quarter or year.”
This explains that a profit and loss sheet is a financial statement that summarises all the costs of the business at a certain period of time. It can vary from a week’s worth of expenses to months and years. Sole traders with small businesses are more likely to have a week’s worth of financial record whereas big PLC’s like Costa would have months and years of profit and loss sheet as they make a lot of sales in a certain amount of time and have different branches so it would benefit them to see the over view of a longer time.

Gross Profit- is the difference between revenue and the cost of production of a product or providing a service, before deducting any overheads or tax

Overhead- is referring to an ongoing expense of operating a business

Net Profit- is an amount of the profit of a venture after taking away all costs

Profit and loss sheet for Costa Coffee
This is the simplified Costa Coffee’s profit and loss sheet. The revenue shows the amount of sales they made all over costa (e.g- coffee, cakes). The cost of sales shows us the amount of finance taken to produce the goods and service of the sales (e.g. the cost of coffee, the salary of the baristas). The gross profit is the amount left after taking away the cost of sales from the revenue.

The distribution costs and administrative expenses includes the amount of money used for things we need in order to run the business like advertisement, rent, delivery services, electricity, insurance etc. The administration costs would be the head office, staff etc. Therefore the operating profit shows us the refined amount of money left after taking away the expenditures of the business.

Shares of loss from joint ventures is when the owner is a parent company and owns other companies or assets due to the investment of his other businesses. In this case Whitbread would invest costa’s finance to own things but if he makes a loss it would be taken away from costa’s profit.
Shares of profit from associate shows the profit Whitbread makes from his other businesses which would be distributed with costa as they invested in it.

Profit before tax shows the actual profit the company has left but before giving away the tax.

Balance Sheet
A Balance sheet shows us a statement of a company’s fixed assets, liabilities and capital, at a certain period of time. It focuses, in detail, of the balance of the income and expenditures over a period of time. Fixed assets- Fixed assets are possessions like plant and machinery, which lasts longer than a year and cannot be sold easily.
Current assets- Current assets are possessions that last less than a year which you need to sell and get rid of before it is wasted. E.g stock (coffee beans in costa’s case)
Current Liability- Current liabilities are short term overdrafts and trade credit which are holding back or slowing down the business.
Long term liability- Long term liabilities are bank loans and mortgages which hold back a business for more than a year into the future.
Capital- A Capital is the finance invested by the owner of the business for certain purposes.

This is an example balance sheet. It clearly shows the assets, liabilities and equities.

Here is an example of Costa Coffee’s balance sheet.
The first thing I noticed was that this example is over 5 years which makes it harder to analysis so I have made my own costa coffee’s balance sheet using the figrues from the original one.

Balance sheet

Year ended
03 March 2011
£m