The operating profit note shows the main items charged or credited in arriving at operating profit. Tax Optimiser builds it from the trial balance, so the work is in getting the trial balance right.
What this note shows
The note opens with "Operating profit is stated after charging/(crediting):" and then lists each item with its current-year and prior-year amount. Charges print as positive figures and credits, such as a profit on disposal or a foreign exchange gain, print in brackets.
Many of these items aren't strictly required for small companies, but they are commonly disclosed and help readers understand the results. FRS 102 Section 1A does require the amount and nature of any items of exceptional size or incidence (paragraph 1AC.31), which you can add with the template described below. The note only exists in FRS 102 Section 1A accounts.
Where the figures come from
Each row reads the balance on one or more trial balance accounts for the current and comparative year. A debit balance is a charge and a credit balance is a credit.
| Printed row | Trial balance account(s) |
|---|---|
| Depreciation of tangible fixed assets | Depreciation of tangible assets |
| Amortisation of intangible assets | Amortisation of intangible fixed assets |
| Impairment of assets | Impairment (the profit and loss account only, not the impairment movements within fixed assets) |
| Loss/(profit) on disposal of tangible fixed assets | Profit/loss on disposal of tangible assets |
| Loss/(profit) on disposal of intangible assets | Profit/loss on disposal of intangible assets |
| Foreign exchange losses/(gains) | Foreign currency gains/losses and Currency gains and losses (added together) |
| Research and development expensed | Research and development expenditure |
| Operating lease charges | Operating leases |
| Directors' remuneration | Directors salaries |
| Pension costs | Pension costs |
| Number of directors to whom benefits accrued under money purchase pension schemes | Not from the trial balance: typed in the note |
A few points to check:
- Directors' remuneration reads only the Directors salaries account. If directors' fees or benefits are posted elsewhere, they are not included.
- Pension costs is the whole Pension costs account, which may include employees as well as directors.
- A row that is nil in both years is hidden, so the printed note only shows what applies.
- Auditors' remuneration isn't shown. Small companies are usually exempt from audit (see Audit exemption). If the accounts are audited, disclose the fee in the additional note.
Completing the note in Tax Optimiser
Open the period, choose View Accounts, then Notes in the Actions menu on the left. Select Operating profit. The Operating Profit section shows a Current Year and Last Year column for each row. The grey boxes come from the trial balance and are read-only. To change one, correct the trial balance.
Some editor labels are shorter than the printed ones. "Amortisation" prints as "Amortisation of intangible assets", and "Number of directors accruing benefits" prints as the full wording in the table above. The editor shows every row, even zero ones. The printed note leaves out rows that are nil in both years.
The last row, Number of directors accruing benefits, is the only one you type. Enter how many directors were building up benefits in a money purchase (defined contribution) pension scheme in each year. Leave it at 0 if none were. Click Save changes to save the note and rebuild the accounts preview.
Wording templates
The Additional note for operating profit section is a text box that prints under the table. It has one template:
- Exceptional item – "Administrative expenses include an exceptional item of £{{Amount}} in respect of {{Description}}." You'll be asked for the
{{Amount}}and{{Description}}.
How it appears in the accounts
In the demo accounts the note prints as note 5. The zero rows (impairment and disposal of intangible assets) are left out, the £1,500 profit on disposal shows as (1,500), and last year's exchange gain shows as (300).
Frequently asked questions
Why is a row missing from my operating profit note?
Rows that are nil in both the current and the prior year are hidden. If you expected a figure, check that the cost is posted to the trial balance account listed above for that row.
Why is the profit on disposal shown in brackets?
The note is "stated after charging/(crediting)". A profit on disposal is a credit to the profit and loss account, so it prints in brackets. A loss prints as a positive charge.
Where is auditors' remuneration in the operating profit note?
It isn't shown, because small companies are usually audit exempt. If the company is audited, add the fee in the Additional note for operating profit.
How do I change the depreciation figure in the note?
Correct the Depreciation of tangible assets account in the trial balance. The note and the fixed asset notes update when you save.
What does "number of directors accruing benefits" mean?
It is the number of directors for whom the company paid into a money purchase (defined contribution) pension scheme during the year. You type it in the note, and the row only prints if it isn't zero.
Where to go next
- Guide to the notes to the accounts – how the Notes screen works
- Previous: Turnover note
- Next: Taxation note
- Audit exemption
- Importing a trial balance