Profit and Loss

Annual and Monthly Profit and Loss Accounts produced automatically

Sole trader financial profit and loss accounts statement and assets

Details of the income and expenditure account in the financial accounting spreadsheets for sole traders and new start up business

PROFIT AND LOSS ACCOUNT

The financial accounting spreadsheets collect the financial records from the sales and purchases accounting spreadsheets in the format required to produce a monthly profit statement showing the net taxable profit or loss for each month. The sole trader basic accounts are an income and expenditure account for the business. By deducting total expenditure from total income, it shows on the "bottom line" whether your business made a profit or loss at the end of that period. The profit statement shows how the business is performing. The financial statement is used to work out the tax bill and also prepare an excel financial spreadsheet of the self employed tax return.

The financial accounts software automatically produces the sole trader profit & loss account from the financial transactions entered in the monthly sales accounting spreadsheets and the monthly expenses accounting spreadsheets

An up to date profit & loss account available in real time in the financial accounting enabling the sole trader to consider and improve the financial performance and is useful should it be required to support financial funding, loans or overdrafts from banks and other financial institutions. Having an up to date profit & loss account available, especially for new start up business, can seriously impress potential lenders to enable the start up business in particular provide the confidence to financial institutions to enable arrangements to stave off possible under capitalisation issues.

This is how the screenshot showing the sales income and expenditure simple profit and loss account as it appears in the financial accounts section of the financial accounts software.

Sole trader accounting software is crucial to growing new and existing small business profitably. Many small businesses go out of business within 3 years of start up. The major reasons being new start up business lack of control of profits or trader beyond their financial limits being under capitalised.

Keeping a tight rein on the profit and loss account provides the sole trader with control over the financial position and business trend with the opportunity to reverse adverse trends immediately they appear. Small business finance software that produces an income and expenditure account is an essential small business tool no new start up business should be without. Run the new start up business without being aware of the profit statement and success dives into the realm of guesswork.

When using the sole trader accounts package it is optional but a good idea to enter the sole trader drawings in a row beneath the last row of the profit & loss account providing an instant view of the money being withdrawn compared with the net profit

FIXED ASSETS AND CAPITAL TAX ALLOWANCES

Fixed items are items such as plant and machinery used by the business over a period of more than one year. Depreciation spreads the financial effect on profits over the life of the fixed asset but does not have an effect on the business tax as depreciation is disallowed as an expense. Instead the business receives a capital tax allowance on the cost of fixed assets to set against its profit.

When the fixed asset schedule is completed the capital allowances are automatically calculated and also update the profit and loss account in the depreciation column. While depreciation is then disallowed in the self assessment tax return the same amount is then added back to the expenses as capital allowances. Capital allowances on vehicles are automatically reduced by the personal use %.

For the financial year 6 April 2007 – 5 April 2008 50% of the cost of the asset can be set off against profits in the year purchased which is called First Year Allowance. The remaining value of the asset is then written off against future years profits at 25% of the book value remaining. The accountancy software has these percentages already written into the book keeping system. For 2008-09 the annual investment allowance of 100% of capital expenditure up to £50,000 has replaced the first year allowance and the writing down allowance has been reduced from 25% to 20%. If the sole trader accounts net written down value of fixed assets is below £1,000 at the end of the tax year the whole balance can be written off against the net taxable profit.

SCREENSHOT OF FIXED ASSETS ACCOUNTING SPREADSHEET

Businesses should set a consistent policy in the treatment of fixed assets and it is suggested that only long term assets (used more than one year) and costing over £100 should be classified as “fixed”.

INCOME TAX CALCULATOR

The financial accounts spreadsheets also contain an income tax calculator to calculate the income tax and national insurance contributions on the net taxable profit. Click this link for further details of the sole trader income tax calculator

SOLE TRADER TAX RETURN SHORT

Potential the most important part of the whole sole trader accounts package is the fully automated completion of the short self employed tax return

Brief descriptions of the full range of Accounting Software, Payroll Software, Company Formation are available on the DIY Accounting home page

"Sole trader financial accounts includes profit and loss account profit statement, fixed assets, calculates tax liability and completes tax return"