Sunday, February 20, 2011
Sample Of A Profit And Loss Statement
First of all i will tell you The Purpose of a P&L Statement.
A Profit and Loss (P&L) statement
measures a company’s sales and
expenses during a specified period of
time. The function of a P&L statement is
to total all sources of revenue and
subtract all expenses related to the
revenue. It shows a company’s financial
progress during the time period being examined.
The P&L statement contains uniform categories of sales and expenses. The
categories include net sales, cost of goods sold, gross margin, selling and
administrative expenses (or operating expense) and net profit. These are
categories that you will use when constructing a P&L statement.
Since it is a rendering of sales and expenses, the P&L statement will give you a
feel for the flow of cash into (and out of) your business. The P&L statement is
also known as the income statement andthe earnings statement.This Business
Builder will explain, through a step-by-step process and the use of a worksheet,
how to create a P&L statement. Accounting terms will be defined as they are
introduced, and a glossary is included for your reference. This Business Builder
will define and explain the data needed to put together a P&L statement, but
before you start, it might be helpful to consider the following questions:
• Does your inventory method allow you to calculate or reasonably estimate the quantity and cost
of goods sold during a specific time period?
• Do you have records of general and administrative expenses?
• Can you separate selling-related expenses from other expenses?
Why Prepare a P&L Statement?
There are two reasons to prepare a P&L statement. One reason is
the P&L statement answers the question, “Am I making any money?”
It is a valuable tool to monitor operations.
A regularly prepared P&L statement either quarterly or monthly
for new businesses will give owners timely and important information
regarding revenues and expenses and tell them whether adjustments
might be necessary to recoup losses or decrease expenses. The P&L
statement also allows outsiders to evaluate your ability to manage
and use your company’s resources.
The second reason to prepare a P&L statement is because it is required
by the IRS. It is the record of a business’ operation that is used to assess
taxes on profits earned. It is the only financial statement required by the IRS.
Below is the Example of the profit and loss statement (click the image to enlarge)
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