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Author : ozellafranecki
Finance & Accounting
Pages 3 (753 words)
Profit and Loss Statements Course Institution Instructor Date Student ID EH&S Consulting A profit and loss statement provides information on the profitability of a business. If expenses are more than income then the business has made a loss. On the other hand, if the income is greater than expenses the business has made a profit…
s that EH&S earned income of $37,942. This consisted of $37,375 for consultancy which is its core business and $567 from photocopying. The business had total expenditure of $20,756 which includes non-cash expenses of $175 for depreciation on equipment. Although depreciation does not involve the movement of funds it represents a charge for the use of the asset. This charge should not be deducted for income tax purposes. However, the charge is reflective of the use of the asset in the company. The charge was calculated for two months based on a 5 year straight line method of depreciation. It is expected that the useful life of equipment which include a computer, fax machine and a copier will not be longer than 5 years. The Internal Revenue Service (2012) indicates that businesses must prorate depreciation deduction based on the months in use. The items of equipment were in use for 2 months and so the charge in the accounts is based on this fact. ...