Important Steps Creating Profit and Loss Statement
Just like a cash flow statement, a simple profit and loss statement template is a document that provides detailed information about a company that includes income and expenses. In accounting, it is also known as an income statement or expense statement. This statement is really important as it helps the businessman to decide better future decisions to improve the company.
The company usually creates a budget and calculate their financial management based on the profit and loss statement. If you run your business, it is your will to create this statement monthly or annually. But for most of the companies, it is usually done monthly to check every detail of their revenue and expenses regularly every month.
Profit and Loss Samples :
Steps to Create Profit and Loss Statement
- Calculate income
The first thing to do while creating a profit and loss statement is to calculate the income of the company or your business. Calculate all income or revenue that you have received from the business and obtain the current balance from the general ledger. If you choose to do it monthly, it means that you need to include all the income in that period and make sure to calculate all of it, selling, and services you received.
- Calculate the number of goods sold
Another important part of the profit and loss statement is reporting the number of goods sold. If the business is selling products, you need to mention the materials, supplies, and the cost of the process. If it is a service business, you need to mention the cost of your employees that provide the service. Make sure to calculate all of the goods sold carefully to find out the right data.
- Calculate expenses
The next step to create a profit and loss statement is calculating the expenses you need to spend in your business. It includes the cost of materials, supplies, processes, taxes, employees, and other expenses. There are also interest payments, depreciation, and amortization expenses that should mention in the statement. That way is needed in order to create complete data for the monthly statement.
- Calculate the operating expenses
Point number 3 is explaining about general expenses that should be mentioned in the statement, and this point is explaining the detailed expanse in the operation process. The process is not something that easily done because it has so many things happening in it. The expenses of this process include the factory or machine rent, travel, equipment, utilities, materials, payroll, and postage.
It can be said that the operating expense is the biggest expansion from the business that needs to be written carefully. The process is also the key of the business which is a fatal problem if the finance division gets wrong in calculating the budget of the operating process. If there is a mistake, it will affect the whole financial company.
In conclusion, the company needs to be very careful in calculating the data for the profit and loss statement. Each step is very important because it connects to each other and also affecting to the balance of the company. That is why simple profit and loss statement template is really needed to make everything simpler and easier.
Simple Profit And Loss Template | Excel – download