The Profit and Loss lists a summary of the revenue, cost of goods sold, and expenses over a specific accounting period.
What is the Profit and Loss (aka Income Statement)?
A Profit and Loss (aka Income Statement) is a financial statement that reports a company's financial performance over a specific accounting period. The Profit and Loss lists a summary of the revenue, cost of goods sold, and expenses over a specific accounting period.
Basically, it will let you know if you have made or lost money each month or each year (depending on how we run the report).
Where does this information come from?
Each transaction that gets entered into your accounting file will affect your financial reports. Some transactions affect the Profit and Loss and some transactions affect the Balance Sheet.
Where does this information come from?
Each transaction that gets entered into your accounting file will affect your financial reports. Some transactions affect the Profit and Loss and some transactions affect the Balance Sheet.
How do you read a Profit and Loss?
The Profit and Loss equation is: Revenue - Cost of Goods Sold/Cost of Sales - Expenses = Net Profit or Loss.
What is Revenue?
Revenue is your gross income and will always be listed first and will be broken into categories if there are any (service income, sales income, etc) to provide the level of detail your business requires.
What is Cost of Goods Sold/Cost of Sales?
Cost of Goods Sold includes the direct cost of producing your product or services. This may include:
The Profit and Loss equation is: Revenue - Cost of Goods Sold/Cost of Sales - Expenses = Net Profit or Loss.
What is Revenue?
Revenue is your gross income and will always be listed first and will be broken into categories if there are any (service income, sales income, etc) to provide the level of detail your business requires.
What is Cost of Goods Sold/Cost of Sales?
Cost of Goods Sold includes the direct cost of producing your product or services. This may include:
- Cost of raw materials
- Cost of items purchased for resale
- Cost of parts used to construct a product
Cost of Goods Sold also includes other direct costs such as labor to produce the product, supplies used in manufacture or sale, shipping costs, costs of containers, freight in, and overhead costs directly related to the manufacture or production activity (like rent and utilities for the manufacturing facility).
What are Operating Expenses?
Operating Expenses are any expenses that you incur that cannot be directly traced to the sale of a product or service. For example, the office supplies, administrative wages, or Facebook ads are operating expenses.
What is Net Profit/Loss?
Net Profit is the “bottom line”. This represents what you have left over after you have paid for all of your expenses. The goal is to have a positive number at the bottom of the report which means you made a profit! Having a negative number means the expenses you incurred were greater than the revenue that was earned.
This is what a Profit and Loss (aka Income Statement) looks like:
