Solution 3.1

Solution 3.1

What is the difference between a Profit and Loss Statement for a service provider compared to a product provider?

The profit and loss account is normally prepared for a period of time showing the summary of revenues and expenses over that period. The presentation of the profit and loss account will differ for businesses that offer a service (consultants, banks, tour operators) to those that sell a product (retailers and publicans).

Profit and Loss account for period ended 30 June			Profit and Loss account for period ended 30 June
SERVICE PROVIDER			PRODUCT PROVIDER
	€	€		€	€
Sales		100,000	Sales		130,000
Less expenses			Less the cost of sales		40,000
Rent	18,000		Gross Profit		90,000
Rates	5,000		Less expenses
Wages and Salaries	40,000		Rent & rates	12,000
Repairs	3,500		Wages and Salaries	25,000
Advertising	5,000		Repairs	2,100
Accountants’ fees	2,000		Advertising	3,000
Solicitors’ fees	1,000		Professional fees	4,000
Insurance	7,000		Office expenses	14,900
Phone	1,500	83,000	Insurance	4,500	65,500
Net Profit		17,000	Net Profit		24,500

The difference between the two profit and loss accounts is that the provider of services does not purchase stock of goods for resale. The product provider purchases stock at one price (cost price) and sells it at another price (selling price). The difference between the two will amount to his gross profit and is shown in a trading account.

Less expenses