Hello,
In the Bpp Practice and Revision Kit, there is a summarised Statement of Profit and Loss,
Profit from Operations 2650
Finance Cost (Loan Interest Note) (300)
2350
Income Tax Expense (700)
Net Profit 1650
I was under the impression, to work the Profit before Tax we obviously add back the Tax deducted, but also adjust for the Interest paid? In this example +300
Net profit by my understanding would be 1650 + 700 + 300 + 2650
However in the answer its 2350 with the interest deducted from the Profit?
Is it correct, and if so, could you explain what it is I am missing, not understanding?
Thank you in advance
J
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Profit from operations
6y ago#1The BPP Kit is correct.
The profit before tax is simply the profit before the deduction of tax and is therefore after subtracting the interest.
2,650 is the PBIT (profit before interest and tax).
I see.
Is there a difference between Finance cost and Interest? Or are they interchangeable?
I have 2 questions asking for Profit before Tax
One question, minuses the Interest to arrive at the PBT
The second adds back the Finance cost, to arrive at PBT
Again, thanks for your patience, John.
6y ago#3Finance cost and interest are the same thing.
The profit before tax is after interest.
If the second question you refer to is in the current edition of the BPP Revision Kit, then tell me which question and I will explain what they have done.
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