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In: Accounting

What type of costing information could be relevant when preparing a profit and loss statement?

What type of costing information could be relevant when preparing a profit and loss statement?

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Expert Solution

In preparation of profit and loss statement the cost are divided into two major head i.e. Direct cost (also know as operating direct expenditure) and Indirect Cost (which are not directly related to volume of operations), which are further known as variable cost and fixed cost the two main costs a company has when producing goods and services. A company's total cost is composed of its total fixed costs and its total variable costs. Variable costs vary with the amount produced. Fixed costs remain the same, no matter how much output a company produces.

Operating Cost includes raw material purchase cost, direct labour cost, carriage inward cost, production cost, etc.

While Indirect costs includes staff training cost, office rent, maintenance cost, advertisement cost, duties and taxes, etc.

From the total revenue less operating costs, we get gross profit/loss.

And Gross profit/loss Add Indirect income Less Indirect Cost, we get Net Profit or Loss.

ekkarill92 answered 1 year ago
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