Commentary

B2.101B Adjustment of profits—example

Business tax
Business tax | Commentary

B2.101B Adjustment of profits—example

Business tax | Commentary

B2.101B Adjustment of profits—example

The following example illustrates some of the typical adjustments that may need to be made to the profit before tax figure in calculating the profits of the trade, as discussed in B2.101A.

Example

Profit and loss account for the year ended 31 December 2017

Assumes a cash basis election has not been made

££
Sales750,000
Opening stock (1.1.17)75,000
Purchases610,000
685,000
Deduct—Closing stock (31.12.17)
Cost of sales102,000583,000
Gross profit167,000
Other income—
Cash discounts received3,000
Bank deposit interest1,000
Reduction in provision for bad debts (1)800
Rents receivable5,200
Profit on sale of van1,200
11,200
178,200
Expenses—
Salaries (2)100,000
Rent, rates and insurance (3)8,000
Lighting and heating3,000
Repairs (4)13,000
General expenses (5)6,000
Depreciation—
Lease (6)5,000
Motor vehicles1,500
136,500
Profit before tax£41,700

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