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Home / Simons-Taxes /Business tax /Part B2 How are trade profits and losses calculated? /Division B2.1 Establishing trade profits and losses /Establishing trade profits and losses / B2.101B Adjustment of profits—example
Commentary

B2.101B Adjustment of profits—example

Business tax

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

££
Sales750,000
Opening stock (1.1.17)75,000
Purchases610,000
685,000
Deduct—Closing stock (31.12.17)
Cost of sales102,000583,000
Gross profit167,000
Other income—
Cash discounts received3,000
Bank deposit interest1,000
Reduction in provision for bad debts (1)800
Rents

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