The following example illustrates some of the typical adjustments that may need to be made to the profit before tax figure in calculating the profits of the trade where the profits have been calculated under GAAP, as discussed in B2.101A.
Example
Profit and loss account for the year ended 31 December 2017
Assumes profits are calculated under GAAP
| £ | £ |
| Sales | | 750,000 |
| Opening stock (1.1.17) | 75,000 | |
| Purchases | 610,000 | |
| 685,000 | |
| Deduct—Closing stock (31.12.17) | | |
| Cost of sales | 102,000 | 583,000 |
| Gross profit | | 167,000 |
| Other income— | | |
| Cash discounts received | 3,000 | |
| Bank deposit interest | 1,000 | |
| Reduction in provision for bad debts (1) | 800 | |
| Rents |
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