Introduction to Professional Practice Introduction to Business Accounts Tutorial Improving Profits What can a business do? 1. Reduce Expenses 2. Charge More - do more of the most profitable work? 3. Do more work for same or lower price i.e. work harder; employ staff to do the work Decision for Partnership agreement - Profit shares (decided between parties on what is appropriate - What capital will be contributed? - Agree on hours/ holidays - Decision making process Cash and providing for liabilities Cash - £5,000 + £48,000 LESS 10,000, £1000, £15,000 = £27,000 Income - Bill sent £60,000 Debtors - £12,000 Expenses - £10,000 Computer - £1,000 Drawings - £15,000 EXAMPLE: Profit and Loss Account for 1st Year's Trading Turnover £60,000 Less Expenses £ 10,000 Bills owing £ 1,000 Net Profit £ 49,000 BALANCE SHEETS Assets + Liabilities · Creditors = liability · Capital (owed to owner)- Liability
· Computer = assets · Cash = assets · Debtors = assets Fixed assets are used to improve the business e.g. premises, machinery, IT equipment Current assets - Debtors, cash, stock (things that can be quickly turned into cash) Balance Sheets (EXAMPLE) FIXED ASSETS = Computer £1,000 CURRENT ASSETS = Debtors £ 12,000 Cash £ 27,000 £ 39,000 Current liabilities Creditors (£1,000) TOTAL ASSETS [minus] TOTAL LIABILITIES NET CURRENT ASSETS £38,000 NET ASSETS £39,000 (STAKE THE OWNER HAS IN THE BUSINESS) CAPITAL £39,000