Grade 8 and 9 : What are accounts?

WHAT ARE ACCOUNTS?

All Businesses produce ACCOUNTS. These are statements that provide financial information about a business. The statements might include information about the revenue, costs and profit that a business records during the year. Or information about debts, capital and assets of a business might be listed. A statement might also show the flows of cash into and out of the business during the year.

e.g. Simple profit statement for Conrad Ltd 2003.

J.Conrad (Shoes Company)
Profit and loss account 2003
$ $

Sales revenue 201,511
Cost of sales (125,870)

Gross Profit 75,641

Wage 18,300
Rent 20,000
Electricity 5,900
Other overhead costs 25,320
(69,520)

Net Profit 6,121

Note :

• That $201,511 was generated from the sale of shoes during the year.
• A total of $125,870 was paid for costs of sales, including materials and other production costs.
• The profits after the costs of sales are deducted is $75,641.
• Other costs included $20,000 for rent and $5,900 in Electricity. The total of these overhead costs during the year were $69,520.
• The net profit made during the year was $6,121. This is calculated by subtracting all costs $125,870 and $69,520 from the sales revenue of $201,511.