Acid Test

Comparitive Analysis - Profit & Loss

This section analyses the organisation’s performance over time, often called “horizontal analysis”. This is a very basic first step to see in general if the organization is doing better over time or worse.

The table below shows the % increase or decrease from the previous year for each line item on the P&L and Balance Sheets. A green or red arrow indicates a positive or negative trend in the right or wrong direction.
Year Ending 31^st March	2004	2005	2006	2007	2008	Total
Income
Turnover	140000	43%	40%	18%	-18%	93%
Total turnover	140000	43%	40%	18%	-18%	93%
Cost of Sales	65000	69%	50%	3%	-12%	131%
Gross Profit	75000	20%	28%	39%	-25%	60%
General and administrative expenses	15000	33%	0%	25%	-20%	33%
Selling expenses	35000	29%	22%	36%	-13%	86%
Total operating expenses	50000	30%	15%	33%	-15%	70%
Operating Profit	25000	0%	60%	50%	-42%	40%
Other interest rec & similar income	0	N/A	N/A	N/A	N/A	N/A
Interest payable and similar charges	0	N/A	N/A	N/A	N/A	N/A
Profit on ordinary activities before taxation	25000	0%	60%	50%	-42%	40%
Tax on profit on ordinary activities	0	N/A	N/A	N/A	N/A	N/A
Profit on ordinary activities after taxation	25000	0%	60%	50%	-42%	40%

Glossary of Terms

Turnover

This is the income received over the statement period through sales of products and/or services.

Cost of Sales

These are the direct costs to a company of producing/delivering a product or service.

Gross Profit

The amount of turnover minus the cost of goods sold.

General and administrative expenses

In a single step income statement, all expenses are added together, primarily for simplicity. Here we have broken the expenses into general and administrative, and selling expenses. The more detail provided, the more information we have to analyse costs. If you do not have this breakdown, enter all operating expenses (not cost of goods sold) in this category.

Selling expenses

All expenses associated with selling the product or service, this could include sales and marketing expenses, advertising, sales staff etc.

Operating profit

Sometimes referred to as Operating Income, Operating profit is the amount of income derived from the company's primary or central activities.

Other interest received and similar income

Other income that is not generated through the company's primary activities such as interest income. Interest income reflects the decisions the company has made concerning how to finance its operations and invest its excess funds. The financing decision is extremely important, but it is separate from the operating decisions of the company and is therefore separated.

Interest payable and similar charges

If you gift aid some of your profits back to a parent company, do not include this in the accounts. The reason is that the tool is analysing the performance of your organisation, not what you choose to do with the profit.

Profit on ordinary activities before tax

This is the net income, prior to taxes, as tax is an important item and should be separated from the other expenses of a company. This is the measure of profit after all revenues and expenses, with the exception of tax.

Profit on ordinary activities after tax

This is the net income or the "bottom line" of the profit and loss statement. It is the measure of profit after all revenues and all expenses, including tax, have been considered.