Posted on

Interested In Starting Your Own Business? This Is For You!

If you are in business you will need to report your businesses’ profit or loss. Depending on the size of your business, will depend on where you have to report to and the format you have to report it in. If your business is a limited company, plc or LLP then you will need to file accounts with Companies House. Depending on the size of your turnover (not profit) will depend on exactly what information you have to include in these accounts and whether they have to be audited.

However, if you are a sole trader or partnership, you do not have to submit accounts to Companies House (the agency who monitor and register businesses under the current Government regulations). A sole trader or partnership, will need to report their profit and loss to HM Revenue & Customs and will need to complete tax returns. Even though you do not need to submit accounts, it can still be advisable to create a small set of simple accounts, including a profit and loss account.

This can then be sent with your tax return to support any entries on your tax return. You may also find that if you apply for any form of credit to a bank or finance company, they may ask for your last three years accounts and in particular will want to see a profit and loss account. So what is a profit and loss account and how do you create one?

A profit and loss account is a summary of your business transactions and simply shows the bottom line of whether your business made a profit or loss at the end of given a period.

To set up your own profit and loss account, you need to sole proprietorship hong kong split the account horizontally into two halves with the top half being your income and the bottom half being your expenditure.

Your income should then be split into two categories, one being turnover and the other being other income. Turnover or business sales is the total amount of your product sales or services in your financial year or period. How you record this information will vary depending on the type and size of your business but you could use a simple listing in a book, or a computer spreadsheet or a computer software program. Other income which needs reporting consists of interest received from bank accounts, sale of any equipment you no longer need, rental income to the business, or any money you put into your business to cover its needs.

When recording your expenditure for your profit and loss account, it normally falls into three key categories, one being cost of sales, business expenses and cost of equipment. Cost of sales are the costs that are incurred in obtaining or creating your product or service. Business expenses are the costs incurred enabling you to carry out your business such as rent, travel and motor expenses, administration and stationery, interest and advertising. Cost of equipment is the cost of any equipment such as computer equipment, furniture, tools and machinery and vehicles that you have bought or leased enabling you to create your business.