BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -It does NOT include selling or administrative expenses (these expenses are listed elsewhere on the P & L statement). For service and professional companies, there will be no cost of goods sold. These types of companies receive income from fees, commissions, and royalties and do not have inventories of goods.

Detailed explanation-2: -The P&L statement shows a company’s ability to generate sales, manage expenses, and create profits. It is prepared based on accounting principles that include revenue recognition, matching, and accruals, which makes it different from the cash flow statement.

Detailed explanation-3: -What is a Principal Payment? A principal payment is a payment toward the original amount of a loan that is owed. In other words, a principal payment is a payment made on a loan that reduces the remaining loan amount due, rather than applying to the payment of interest charged on the loan.

Detailed explanation-4: -Definition of Loan Principal Payment Similarly, any repayment of the principal amount will not be an expense and therefore will not be reported on the income statement. The principal payment is recorded as a reduction of the liability Notes Payable or Loans Payable.