Life
shouldn't be all about money. However, we should not disregard the reality that
we need money to have a good life. Don’t think so? Let’s hear from Anna.
Five months
ago, Anna felt like the happiest woman in the world. She got married with the
love of her life and more than anybody else, she was most excited to have her own
family. With a loving spouse, all she ever wanted that time were two perfect
kids, and a warm and comfy home.
Her
husband’s parents had a house built for them. Everything seemed perfect and she
believed they were ready to have a family. A month after their marriage, Anna
learned she was pregnant so she had to stop working. Her husband worked for a
big company and his monthly salary was enough to support a family of three so they
had nothing to worry about.
Four months
later, the company her husband was working for, had an unexpected crisis and
had to stop running. Anna’s husband lost his job and that was the beginning of
sleepless nights for the couple. They knew very well that their savings won’t
be enough to pay for the hospital bills, buy all the things they wanted for
their baby and the baby’s needs, and maintain their current lifestyle at the
same time.
Stress in
their home grew every day, as Anna’s husband came home with nothing but
frustration from unsuccessful attempts of finding a new job. The couple, both
agonized by the situation, began to argue more and more each day. This was not
good for them, neither for the baby.
Five months ago, everything seemed perfect and now, everything seems to be falling apart.
Now do you
think we need money to have a good life?
Nope. Because you know so. J
Anna never lost hope. She couldn’t give up easily and let everything she dreamt
of turn into a nightmare. She thought of using some of their savings to run a small business at home. Anna did
everything to learn about business and is sharing some of her new
knowledge with us.
Profit and Loss
Profit
is the amount by which the sales are greater than the cost of goods sold and
the operating expenses. Margin also means gain or profit.
The
formulas in computing profit are as follows;
Net Sales = Gross Sales – Refunds and
Allowances
Net Profit = Gross Profit – Operating Expenses
The net sales and profit may also be given in scheme
diagram as follows:
Gross Sales
-
Sales Returns and Allowances
_______________________________
Net Sales
-
Costs of Goods Sold
_______________________________
Gross Profit
-
Operating Expenses
_______________________________
Net Profit
1. Gross Sales is the
actual amount received for selling the goods.
2. Refunds are amounts
returned usually if goods are defective.
3. Net sales are obtained when refunds
are being deducted from the gross sales.
4. Costs of goods sold or
buying price is the amount paid for articles bought including the buying expenses.
To compute for the cost of goods sold for a period of
time, we have the formula as follows:
Available Goods = Beginning Inventory +
Purchases
Costs of Goods Sold = Available Goods – Ending
Inventory
The above may be diagrammed as follows:
Beginning Inventory
+ Purchases
______________________
Goods For Sale
-
Ending Inventory
______________________
Costs of Goods Sold
5. Inventory is an
itemized list of goods on hand.
6. Gross Profit is the
difference between the net sales and the cost of goods sold.
7. Operating expenses
or overhead are selling expenses such as salaries or wages, traveling expenses,
rentals, water, electric bills, commissions, taxes.
8. Net Profit is the
amount obtained when all the selling expenses or other cost of doing business
are deducted from the gross profit.
In case the sales are less
than the cost of goods sold, there is a loss. The formulas in computing losses
are as follows:
Gross
Loss = Costs of Goods Sold – Net Sales
Net
Loss = Gross Loss + Operating Expenses
The relationship of the terms
of loss may be diagrammed schematically as follows:
Cost of Goods Sold
- Net
Sales
_____________________
Gross Loss
+
Operating Expenses
_____________________
Net Loss
"When you reach an obstacle, turn it into an opportunity. You have the choice. You can overcome it and be a winner, or you can allow it to overcome you and be a loser. The choice is yours and yours alone. Refuse to throw in the towel. Go that extra mile that failures refuse to travel. It is far better to be exhausted from success than to be rested from failure."
- Mary Kay Ash, founder of Mary Kay Cosmetics
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Checked by Prof. Crisencio Paner
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Checked by Prof. Crisencio Paner
