How to Format a Profit & Loss Statement

How much money is your business making? How much are you spending? A properly formatted profit and loss statement (P&L) can help you answer those questions and perhaps shed some light on areas of your business that need more attention. Also called an income statement, no business should be without a correctly formatted P&L.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Computer
• Spreadsheet software

1. Open a new spreadsheet and save it with an appropriate name. The first line should be the title, including your company name. Add a line below to show the beginning and ending dates you’ve selected. Leave a blank line and proceed to the next step.
2. Create a column titled revenue. Below that, add a separate line for each specific area of revenue. This could include sales, interest income, etc. For each line item, put the description in column A and the dollar amount in Column B.
3. Total the revenue. This line should hold the formula that sums all revenue line items above it. Put the title Total Revenue in column A and the formula in Column B.
4. Create a column titled expenses. Below that, add a separate line for each specific area of expenses. This could include cost of goods sold, interest expenses, operating, admin, etc. For each line item, put the description in column A and the dollar amount in Column B.
5. Total the expenses. This line should hold the formula that sums all expense line items above it. Put the title Total Expenses in column A and the formula in Column B.
6. Figure net income. Create the title Net Income. This line should hold the formula that subtracts Total Expenses from Total Revenue. Put the title Net Income in column A and the formula in Column B. This number represents your bottom line, or pre-tax income.

Tips & Warnings

• When using computer spreadsheet software, remember to save your work often. This will prevent you from having to start over should you experience technical difficulties.
• Customize your P&L to reflect the specific revenue and expense line items unique to your company.
• Omit line items that don’t apply to your company.
• See “Additional Resources” below for more tips and help on business development, planning, and analysis.
• Garbage in, garbage out. Your P&L is only as good as the numbers you use to create it.
• Always keep a backup file in case something happens to your original.