A profit loss statement (P&L) is a valuable tool to drive your business to success
This article will help you breakdown the basics of a profit loss statement and how it can help your business.
A profit loss statement allows you, the owner to dissect their financial information and make changes for the upcoming reporting period. A profit loss statement is a financial statement that outlines the income and expenses during a specific period.
It shows a breakdown of expenses incurred, and what costs ate into your overall profit.
This report can help you identify any differences in your financial projections and actual profit. Let me explain.
For a single quarter, you were projected to net a total of $2,739 in profit. However, when you take a look at your profit report, you notice that you only profited $947.
Based on the financial analysis done by your accountant, you identify various expenses that were unplanned. If you’re unable to identify any differences, you should contact a professional to assist you. The account managers at Anguiano Consulting can provide an excellent breakdown on any differences you don’t understand.
For the next quarter, your profit is projected at $793. However, your profit report indicates your gain is $2,147. Should you identify the differences? Yes, you should.
We hardly manage our money when we are making it but the more you handle it, the more you’ll save.
What if the difference had to do with a bill that wasn’t paid. Your profit report can catch this so you can avoid any unnecessary fees.
At Anguiano, we offer 1 on 1 financial business coaching to help you understand your numbers. Using a live visual call, we will break down your profit loss statement until you know it.
The profit loss statement is also known as the income statement. Below is an example of a quarterly income statement from Coca Cola.
The income statement starts with revenue and ends with the net income.
Net Income = (Revenue + Gains or additional income) — (Expenses + Losses or additional expenses)
How to read an income statement
The first section is revenue, the above statement indicates that the gross profit for 4th Quarter 12/31/2018 is $4,337,000. Gross means before taxes.
Gross profit is the total revenue minus the cost of revenue.
After revenue is your operating expenses. In total, there are $2,701,000 in operating expenses under Sales, General, and Admin. The operating costs are deducted from the gross profit for a total of $1,636,000 in operating income.
The next section is income from continuing operations, this includes one time earnings (income or expenses), interest expenses and any taxes. This will give you the net income from continuing operations for Coca Cola.
Any events that aren’t recurring are removed to give us the Net Income applicable to common shares.
Monthly and Quarterly financial reports are a useful tool for any CEO.
You might be wondering how I have Coca Cola’s income statement for 2018.
The Securities and Exchange Commission (SEC) has reporting requirements for any public company with a class of securities registered under Section 12 or Section 15(d) of the Securities Exchange Act of 1934.
In English, federal laws require publicly traded companies to disclose information on an ongoing basis.
Income statement role
The income statement provides more than the necessary numbers. It serves management as a tool and allows you to adjust based on these insights.
This includes the fundamental operations, the efficiency of management, or areas with unnecessary expenses and operating costs.
Based on this statement, management can expand, push specific campaigns, shut down departments, or discontinue product lines.
While your company in Hesperia will not have Coca Cola’s numbers, you can use your income statement to help grow your business. Our Accounts can assist you in preparing and analyzing your numbers through strategic accounting.
Although there aren’t many publicly traded companies in Hesperia, it doesn’t mean you can’t benefit from an income statement.
Income statements allow you to look at a company’s financial history. Think of it like your carfax report, except it’s full of numbers. The numbers might not mean much to you, but to a trained professional they can paint a story.
