ACCoUnTInG AnD FInAnCIAl STATEMEnTS 25 Profit-and-loss account Sales Cost of sales Gross profit margin Rent/Rates/Power Expense Depreciation expense Net profit/(loss) 900 100 800 800 100 (100) Note that the trader has actually made a loss during the first year of trading. He still has plenty of cash in the bank, but after all costs including depreciation he has made a loss. The next stage is to prepare a balance sheet to show the overall financial position. balance sheet