GCSE Business Studies

Profit and Loss Accounts
Introduction	An entrepreneur brings together land, labour and machinery which he or she uses to produce goods or services. These are sold with the hope of making more money than was spent. This is profit and we use profit and loss accounts to see whether a business has had success in meeting this aim. You should be able to explain the relationship between the components of a trading and profit and loss account, i.e. turnover, cost of sales, gross profit, net profit You should also be able to calculate and use net profit and gross profit ratios to inform decisions relating to the performance (profitability) of the business
What is Profit?	A look at what we actually mean by profit and why making a profit is one of the fundamental aims of most businesses.
Gross Profit	A first measure of a business' profitability, looking at how much profit is made from making and selling its products.
Net Profit	A more accurate measure of profitability that considers all of the costs a business faces.
Ratios	Tools that can be used to judge the profitability of a business.

Profit and Loss Accounts