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MANAGEM EN T
• PROFIT MAXIMIZATION
• WEALTH MAXIMIZATION
PROFIT MAXIMIZATION
•Increase in revenue
•Controlling costs
•Minimizing risks
Basics of financial
accounting
Secured loans (term 143 131 Current assets, loans, 234 156
loans, cash credit) 69 25 and advances( cash
Unsecured loans &bank, debtors,
( bank credit, inter- inventories &advances)
corporate deposits)
Current liabilities and 105 81
provision
• May be presented in
account form or report
form.
• Usually use report form
P&L Account of ABC Ltd as
on 31/3/2007
2007 2006
Net sales 701 623
Cost of goods sold 552 475
Stocks 421
Wages/sal 68
Other manu ex 63
Gross profit 149 148
Operating expenses 60 49
Depreciation 30
Gen admn 12
Selling 18
Operating profit 89 99
Non-operating gain/loss - 6
Profit before interest and taxes 89 105
Interest and taxes 56 63
Profit after tax 34 42
FACTORS – P& L ACCOUNT
• NET SALES
• COST OF GOODS SOLD
• GROSS PROFIT
• OPERATING EXPENSES
• OPERATING PROFIT
• NON-OPERATING SURPLUS/DEFICIT
• PROFIT BEFORE INTEREST AND TAX
• INTEREST
• PROFIT BEFORE TAX
• TAX
• PROFIT AFTER TAX
• PRIOR PERIOD ADJUSTMENTS
• AMOUNT AVAILABLE FOR APPROPRIATIONS
• APPROPRIATIONS
• BALANCE ACRRIED FORWARD
Net sale
• NET SALE IS DEFINED AS-
Sales-sales return-excise
duty.
• SALES= SUM OF INVOICE PRICE AND
SERVICES RENDERED DURING THE PERIOD
• SALES RETURN= INVOICE VALUE OF GOODS
RETURNED BY CUSTOMERS
• ED= AMOUNT PAID TO EXCISE DEPT
Cost of goods sold
• Includes
• Direct material cost
• Direct labor cost
• Manufacturing overhead
Gross profit