There is no mention of the fact that he has $1,500 of assets (merchandise for resale that he has paid for but has not yet sold, (we will allow this business a 100% mark-up on merchandise purchased for resale)).
If we extend his business to the end of the month, give him $25,000 in total sales and $16,000 in total expenses ($1,000 for rent and $15,000 for merchandise that he has purchased his Profit & Loss statement might look something like this:
Profit & Loss statement at the end of the 1st month:
Sales |
$ 25,000 |
And the business still has $2,500 in goods for resale on its shelves.
If I didn’t confuse you too badly and you managed to get through the aforementioned scenario let’s add one item of complexity to his business.
We will utilize the same basic business model with the exception that we will now give the business 30 days of credit from its suppliers on merchandise for resale.
At the end of the first day his Profit & Loss statement would look like this:
Sales |
$ 1,000 |
If we then extend the business to the end of the month the Profit & Loss statement would look like this:
Profit & Loss statement at the end of the 1st month:
Sales |
$ 25,000 |