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
| £ | £ |
| Sales | | 750,000 |
| Opening stock (1.1.17) | 75,000 | |
| Purchases | 610,000 | |
| 685,000 | |
| Deduct—Closing stock (31.12.17) | | |
| Cost of sales | 102,000 | 583,000 |
| Gross profit | | 167,000 |
| Other income— | | |
| Cash discounts received | 3,000 | |
| Bank deposit interest | 1,000 | |
| Reduction in provision for bad debts (1) | 800 | |
| Rents receivable | 5,200 | |
| Profit on sale of van | 1,200 | |
| | 11,200 |
| | 178,200 |
| Expenses— | | |
| Salaries (2) | 100,000 | |
| Rent, rates and insurance (3) | 8,000 | |
| Lighting and heating | 3,000 | |
| Repairs (4) | 13,000 | |
| General expenses (5) | 6,000 | |
| Depreciation— | | |
| Lease (6) | 5,000 | |
| Motor vehicles | 1,500 | |
| | 136,500 |
| Profit before tax | | £41,700 |
| | |
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