The Profit & Loss account 6

	management
	The Profit & Loss account

Consequently in the above example the entire profit of £70.8m could be distributed to the shareholders as dividends. However, as is usually the case, part (£35.3m) is distributed and the rest (£35.5m) is retained within the company as a profit and loss account balance (reserve) - thus increasing the assets it has at its disposal for further profitable investment (balanced by an equal increase in the amount of shareholders' claims).

Revenue Items:

Turnover (Sales revenue) - This is the total of all goods and services sold by the company as a result of its normal productive/trading activities. (It excludes tax and intra-group transfers)

Expense Items:

Cost of Sales - These are all the expenses associated with the company's ordinary productive/trading activities (production expenses (material, labour and overheads) etc.) and used up in earning sales revenues during the period.

Operating expenses - This includes distribution and administrative expenses not directly connected with productive/trading activities but supporting them.