How to Define a Profit & Loss Statement
Defining your profit and loss statement is the initial step in creating your P&L. Without a proper definition as it pertains to your business, the entire statement means nothing to you or those who read it. Defining your profit and loss statement is a matter of determining how it will be used.
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Instructions
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How to Define a Profit & Loss Statement
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Determine who will be using your profit & loss statement. Profit & loss statements are typically viewed primarily by managers and accountants of businesses, but yours might also be viewed by those from whom you are seeking loans, potential clients or potential investors. Determining how your profit & loss statement will be used will go a long way to defining your P&L.
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Decide what you will include in your profit & loss statement. Profit & loss statements include information about income and expenditures, but depending on the audience for your P&L, you may decide to cater it to a specific group. If you are trying to convince a specific client to hire your company, you will want to create a P&L that is specific to that particular need.
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Define a traditional profit & loss statement as a financial statement that lists income and expenditures during a set period of time.
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Look at how your business's profit & loss statements were defined in the past. Following the same definitions can help for consistency. You will likely want to analyze the data and compare current profit & loss statements with past ones to determine how your company has been doing. Having a similar definition and including similar things in a profit & loss statement as you did in past years can help make this process simpler.
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Get others involved in defining your business's profit & loss statement. Assemble a team of managers or accountants who can help you determine what specific way your business should define your profit & loss statement.
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