What is a Profit and Loss Statement?
A Profit and Loss Statement is a financial document that companies use to evaluate their financial status within a time period. It enables businesses to asses their financial performance in the past and helps them predict their financial standing in the future, allowing them to come up with and implement solutions to improve the way they manage their finances.
As a key business tool, a Profit and Loss Statement lets managers and owners keep track and view their sources of income and the allocation of their expenses. No matter the nature of a business and whether it sells goods or provides services, using this document provides a good idea of how a company is operating from a financial perspective.
In addition, by preparing and reviewing a Profit and Loss Statement periodically, it helps a business prepare its business tax return. Using the information from the statement as the basis for the calculation of net income, a company will be able to determine accurately the income tax it must pay.
Moreover, a Profit and Loss Statement can be used to show investors and creditors that it is beneficial to get on board with your business, as it gives them a quick overview or summary of the financial state of your company. The document is typically prepared by owners or accountants to be used by owners, finance officers, and shareholders to understand the state of a business. It may also be used by professionals to track their income and personal expenses to know if they are saving money or spending more than they earn.
How to Fill Out a Profit and Loss Statement Template?
The first step to filling out a Profit and Loss Statement template is to determine the period of time to be evaluated. In general, you can calculate for a month; nevertheless, you may evaluate on a quarterly, yearly, or even a weekly basis.
Below is a guide to help you fill out our Profit and Loss Statement Template.
The topmost part of a Profit and Loss Statement should show your company name. Provide your business address below the company name. Then, determine the period of time to be evaluated.
For the Income section, you can keep track of any money you are earning through sales of your products and services. If your company deals with the selling of products, provide the total sales amount on the Sales Amount field. For other income, including non-operation income such as rental or interest, provide the total amount on the Other Income Amount field. Compute for the Total Income Amount.
For the Expenses section, depending on the category of the expenses, provide the total amount of expenses on their respective field. If the expense falls under a category that is not listed, use the Other Expenses field. Compute for the Total Expenses Amount.
For the expenses, you may track your operating expenses and non-recurring expenses together or separately, whichever is easier for evaluation.
Once you have computed for the total amounts of the income and the expenses, subtract the Total Expenses Amount from the Total Income Amount to determine Profit or Loss.
Once you are done with the computations, write your name on the Prepared By field and the date you have completed the template.