How to Create a Profit and Loss Statement
A Profit and Loss Statement is also commonly called an Income Statement. The purpose of the statement is to measure and record a company's income and expenses over the specified period of time. This shows a company whether they are operating in the red or in the black and where changes need to be made. This article will instruct you on how to prepare a Profit and Loss Statement for your business.
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Things You'll Need
- Paper and Pen (or computer)
- Receipts for expenses
- Proof of Income
- Calculator
Instructions
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1
Create a heading at the top of your paper. There are two lines needed and both should be centered. The first line should read "Profit and Loss Statement (your company's name goes here)." The second line tells what period of time you are reviewing so it should read, "For the month ended March 31, 2008". Change March 31, 2008 with your ending date and your heading is done.
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2
Create your categories. These categories should be centered left. You should have two categories and a final Net Income. So first you are going to write Revenue: and hit enter. Leave space to write all your sources of revenue. Next write Expenses: and hit enter. Leave enough spaces to list your expenses. Finally your last line should read Net Income. Remember these three phrases are centered left: Revenue, Expenses, and Net Income.
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3
Fill in your Revenue items. Now it's time to fill in your income sources under Revenue. Make sure you hit the space bar 5 times before you enter your income sources. After you enter all your income sources write Gross Profit. Now here is the tricky part. All your income figures should be written in a column directly after their names. Your total gross profit although written with the 5 space indent should be written in a column close to the right side of the page. Almost like you have an imaginary line in between the two. When you write your Gross Profit number in the second column place one single line underneath it.
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Fill in your Expense items. Now it's time to fill in your expenses under Expenses. Make sure you hit the space bar 5 times before you list your expenses. After you enter all your expenses write Total Expenses. Now here is the tricky part. All your expense figures should be written in a column directly after their names. Your total expenses although written with the 5 space indent should be written in a column close to the right side of the page. Almost like you have an imaginary line in between the two. When you write your total expenses number in the second column place one single line underneath it. This total should also be placed in parenthesis to indicate a negative number.
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5
Subtract to get your Net Income. Now you are going to subtract your expenses from your income. Your total will go in the imaginary second column, but this time you are going to put two lines underneath the figure. If this number comes out as a loss (a negative number) you should also include parenthesis around it.
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Tips & Warnings
Only list expenses you have proof of, otherwise you could have problems if you get audited. Always keep detailed records and receipts.
You may want to hire an accountant to do this statement for you if your business is growing. You don't want to make any mistakes or not claim some expenses that you legally can.
