Chapter 2 Understanding Management Reports

Abstract

In this chapter we’ll look at the main type of report that you will need to help you manage your area better – the profit and loss report. For different departments you’ll see reports that include not only monetary figures but also percentages for the actual amounts, the amounts that were budgeted, and the difference between them. Later in the chapter we’ll see how to use these.
There are also statements used by the general manager – a summary profit and loss (P&L) and then the balance sheet which is important when managing stocks, cash and debtors as well as showing the total value and stability of the business. In order to know how all these accounts are put together we will also examine the activities that need to take place at the end of each month.
So by the end of this chapter you should be able to:
- Identify different items that appear in a profit and loss report
- Calculate profits for a simple business
- Calculate variances and percentages
- Assemble a balance sheet
- Calculate accruals, prepayments and depreciation.