We’re about to break down exactly what makes up your profit and loss account.
|Income||Money you receive from your business activities; this can be the sale of goods or providing services|
|Cost of sales*||Expenses that directly relate to your income; if your cost of sales increases, your income should increase.|
|Gross profit*||Income less Cost of sales|
|Operating expenses||Costs needed to run your business - these are deductible for tax purposes|
|Shareholder remuneration||Allocation of company profit to a shareholder|
|Non-cash expenses||An expense that you can claim for tax purposes, but no money changed hands - the most common example is depreciation on fixed assets|
|Net profit or loss before taxation and adjustments||Business income less all tax deductible expenses|
|Non-deductible expenses||Expenses incurred as part of your business activities, but aren't deductible for tax purposes - for example, fines and penalties|
|Net profit or loss||Gross profit less all of the expenses above|
* Not all businesses will have a cost of sales section or gross profit. It’s usually only applicable when you’re selling goods or performing work that involves raw materials (e.g. construction). Those in the service industry are likely to only have expenses of an operating nature.
We have more detailed information and examples in this blog.