I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART A: THE CONTEXT AND PURPOSE OF FINANCIAL REPORTING 

 

16

 

A simple statement of profit or loss for a sole trader is shown below.  

A TRADER 

STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 APRIL 20X7 

 

 

$      

Revenue 

 

150,000 

Cost of sales 

 

  75,000 

Gross profit 

 

75,000 

Other expenses 

 

  64,600 

Profit for the year 

 

  10,400 

Once again, this example is given purely for illustrative purposes. 

6.3 Purpose of financial statements  

Both the statement of financial position and the statement of profit or loss are summaries of 

accumulated data. For example, the statement of profit or loss shows a figure for revenue earned from 

selling goods to customers. This is the total amount of revenue earned from all the individual sales made 

during the period. One of the jobs of an accountant is to devise methods of recording such individual 

transactions, so as to produce summarised financial statements from them. 

The statement of financial position and the statement of profit or loss form the basis of the financial 

statements of most businesses. For limited liability companies, other information by way of statements 

and notes may be required by national legislation and/or accounting standards, for example a statement