Accounts Demystified, 7th Edition

4

Creating the profit & loss account and cash flow statement

• Creating the profit & loss account
• Creating the cash flow statement
• Summary

Now we’re clear about what the P&L and cash flow statement are, we need to see how they are created. First we’ll look at the P&L. I’ll start by showing you the P&L at its most simplistic and then we’ll modify it slightly to make it more useful. We’ll then repeat the same exercise for the cash flow statement.

Creating the profit & loss account

The P&L as a list

Of the 17 entries processed to get the balance sheet of SBL, only nine affected the retained profit of the company. These nine entries are shown in Table 4.1. Against each entry I have put the amount by which it affected retained profit. Entries that ...