Help with butget statement

[questa_services]

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Hi everyone,

I am in the middle of making business plan for my company. I am using Anatomy of Business Plan book as my guideline and I am currently stuck on budgeting. I am trying to find explanation why things like, purchase of new equipment, loan repayments, owner drawings, are non-income items. P&L statement does not include.
How do these expenses relate to net profit after tax?
I hope this is clear enough because I am not 100% sure how to address this question but it is really frustrating for me.

Regards

[whateverbusinesssolution]

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Hi,
The items that you have made reference to will be treated as assets or liabilities and not necessarily as income items. Give us a call if you like as we may be able to assist in the preparation of the business plan/ budgets
Regards,

[BruceR]

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questa, post: 8239 wrote:

why things like, purchase of new equipment, loan repayments, owner drawings, are non-income items. P&L statement does not include.
How do these expenses relate to net profit after tax?

Regards

Hi,
In short the P&L statement measures income in a particular against costs measured over the same period. Equipment will have a useful life beyond the time you buy it – this is recognised over that life through depreciation which is how it is reflected in the P&L. Loans have interest as the P&L expense (as the loan principle wasn’t income, the repayments can’t be expenses).
Drawings have nothing to do with the business except they are you drawing out the profit – not a business cost.
You may be confusing P&L and Cash Flow statements which should both be part of your financial plan but measure different things (profitability/performance and solvency respectively).
However I recommend you get advice – although it may come at a cost, having a professional will allow you to concentrate on your business which increases your chance of success.
Good luck with your business!
Cheers
Bruce

[Author]

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