While there are several reports produced to manage the finances of a business, a profit and loss statement is regarded by many as the most important. Why? Your profit and loss statement shows the all-important financials of your business including if your business is profitable. A reliable bookkeeping system will allow you to produce a profit and loss statement for any set date range whether that be a week, month, quarter or year.
Read below to learn more about understanding a profit and loss statement including:
- What information is shown on a profit and loss statement?
- How can a profit and loss statement help my business?
- How do I ensure my profit and loss statement is accurate?
What information is shown on a profit and loss statement?
There are 3 main components shown on a profit and loss statement which are the income, cost of goods sold (if applicable) and the businesses expenses. Income can include income received from the sale of products or services. Cost of goods sold are the direct costs to produce that product which may be manufactured by the business or purchased then sold. Expenses are those that were incurred by the business.
How can a profit and loss statement help my business?
Your profit and loss statement can be used to improve the financial health of your business. It can show the fluctuations of profit and loss over certain periods of time and highlight increases or decreases to income, expenses and cost of goods sold. Identifying trends in your profit and loss statement, both good and bad, can help you to make changes needed to ensure your business maximises profits.
How do I ensure my profit and loss statement is accurate?
To ensure the accuracy of your profit and loss statement, it’s crucial the income, cost of goods sold and expenses are accurately entered into your bookkeeping software. To ensure accuracy, it is important a business owner or their bookkeeper understands what figures are used in a profit and loss statement, what income, cost of goods sold and business expenses are, plus ensuring all three are accurately recorded.
Freed Up Accounting and Bookkeeping Solutions are registered and certified bookkeeping experts in Western Australia and can assist with your profit and loss statement.
At Freed Up Accounting and Bookkeeping Solutions, our main principal, Naomi is a registered BAS Agent (#25959844) with the ATO. She is also a qualified Accountant with a Bachelor of Financial Admin (Accounting) and a member of the Institute of Certified Bookkeepers and the Australian Bookkeepers Network.
Our team are ready to get to work and can assist in the ongoing bookkeeping needs of your business including profit and loss statement recording and reporting. Call our team today on 0438 977 767.
Disclaimer: The information in this article is general information only.