Some parts of a profit and loss account, part 2

Some parts of a profit and loss account, part 2

Of course, profit and the cost of COGS are the two most critical components of a profit and loss account, or at least they what people initially look like. But a profit and loss account is really the sum of its parts, and they must all be carefully, consistently and accurately.

Depreciation reports additional costs, a company can have a method of loading and the use of short-lived most of the costs in the first years, or longer life method and the cost evenly throughout the year. Depreciation is a heavy burden for some companies, and the method of reporting is particularly essential for them.

One of the more complex elements of a profit and loss account is the reports of the pensions of employees and pension rights. The subject line GAAP, these costs is complex and several significant estimates should be taken by the company, such as the rate of return on the portfolio of the funds reserved for these future expected commitments. This and other estimates affect the amount of the costs.

Many products are sold with guarantees and guarantee express or implied. The company must estimate the costs of these future commitments and include this amount as an expense in the same period that the goods are sold with the cost of goods. Really cannot wait until clients return truly products for repair or replacement, prognosis as a percentage of all of the products sold.

Other operating expenses that are reported in a profit and loss account could also be timing or estimation of considerations. Some costs are also nature, which means that the amount is spent the year depends on the judgment of discretionary management.

Earnings before interest and taxes (EBIT) measure the sales revenue, less any costs above this line. This depends on decisions for the inclusion of revenue from sales, costs, and how the accounting methods are executed.

Some parts of a profit and loss account, part 2 - Internet Business Online News