Profit And Loss And Balance Sheets Page 15
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26.
Calculate the total of all the income
Depreciation Of Fixed Assets
expected but don’t include loans.
Fixed assets are those with a long life
.
Show all significant expenditure
expectancy and which would have a value
items separately. Items such as rent
in the open market. Those can include:
may be paid quarterly or half yearly, but
.
Equipment
the figures should be spread over the
.
Pictures and fittings
months involved. In this forecast you
are concerned with when the income
.
Premises
or expenditure is generated, not when
.
Land
it is paid.
.
Machinery
.
Unless you’re producing a forecast
.
covering all income and expenditure (for
Motor vehicles etc.
instance an annual forecast) remember
The total cost of these assets should not
that you may be spending a lot of money
be put in the profit and loss account. The
on stock or materials in one period that
cost should be spread over the number
you won’t be using until later. For, say,
of years you expect the assets to last for.
quarterly profit and loss forecasts or
This process of spreading the cost is
accounts, only count the value of the sales
known as ’depreciation’, or in some cases
and expenditure related to the activity of
capital allowances.
the business in that quarter.
.
Include an estimate of the wear-and-tear
on equipment and premises caused by the
business activity. This is usually calculated
as the ’depreciation’, the loss of value of
an asset over time - if you estimate that
a piece of machinery may last five years
before it is worn out and needs replacing,
then the depreciation per year is 1/5th of
its value.
.
Calculate the total of all expenditure
expected but don’t include loan
repayments, only the interest paid on
the loan that period: it’s a cost of the
business like all the others.
.
Calculate the difference between the
monthly income and expenditure.
Where expenditure exceeds income
(i.e. a loss) these figures are usually
shown in brackets.
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