Other Bookkeeping Services
- Bank Reconciliations
- Record Debit/Credit Card Transactions
- Process Regular Payroll Checks
- File Federal and State Quarterly Taxes
- Process Year End W2 For Employees
- Create and Enter Customer Invoices
- Post Customer Payments and Bank Deposits
- Process Monthly A/R Statements
- Review Customer Aging Report
- Prepare Profit and Loss Statement
- Prepare Balance Sheet Statement
- Process Scheduled Sales Tax Payments
- Prepare Regular Sales Tax Filings
The goal of every business that is “for profit” is to make money and be profitable. Generally when you provide a service or sell a product, you earn income and make money. The income though, is only part of the equation.
Every business has income, but there is also expense that comes with this. There are varying kinds of expenses such as cost of goods sold, labor, office supplies, and utilities. These all need to be categorized in an organized way.
As each income and expense transaction is entered in the accounting software, the profit and loss statement is built accordingly. This report is available and takes all of the data entry, showing the income of the business at the top, and the expenses directly below.
It is very common to have expenses lumped in two categories. Cost of Goods Sold, which are direct costs to operate the business are listed at the top of the expenses. After this, most accounting profit and loss reports will show a profit amount.
Secondly are the Overhead Expenses which are typically office expenses, insurance, and utilities, among others. This is usually the largest section of the report as there can be a variety of overhead expenses for a business.
The remainder left over at the bottom is the profit. If there are more expenses than income, or course this is a business loss.
The profit and loss is a great tool to show business owner how profitable their business is. It also will show trends in the business such as changes in income from one month to the next, or from one year to the next.
These trends can show positive signs such as growth in the company with increased income. There can also be warning signs of an increase of cost from month to month perhaps with a supplier charging more.
Learning how to read this report and checking it on a regular basis (ideally at least once per month) is important to manage your business well and necessary in order to remain profitable and make decisions accordingly.