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Profit from operations

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Profit from operations

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 12, 2019 at 2:14 pm #548903
    jackstyna
    Member
    • Topics: 3
    • Replies: 5
    • ☆

    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

    October 12, 2019 at 2:28 pm #548910
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    The 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).

    October 12, 2019 at 3:57 pm #548921
    jackstyna
    Member
    • Topics: 3
    • Replies: 5
    • ☆

    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.

    October 13, 2019 at 10:39 am #548981
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    Finance 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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