For the sake of accountability in business, all the profits and losses have to be documented and kept accurate track of. Such records may be used for among others to gauge the health of a business, compare performances with other like-minded businesses and keep track of overall performances.
All these details are captured in a profit and loss statement. It is necessary to know more about the document. We are aware of that very fact. That is why we have seen it necessary to craft and showcase the finest details of the statement. Our discussions hereunder endeavor to do just that.
What is a Profit and Loss Statement?
A profit and loss statement is a financial statement that contains a summary of the costs, revenues, and expenditures incurred during a typical financial period. It is also called the income statement. The periods covered by this statement vary considerably from a quarter, half to a whole year.
These records contained in the statement provide information concerning the ability or lack of it of the company concerned to generate profit in the long run. It may be used to reduce costs, streamline operations, and facilitate the earnings of the company that makes use of it.
Profit and Loss Statement Templates
Basic Terms on Your Profit and Loss Statement
A typical profit and loss statement contains the following terms:
- Sales and revenues – These are incomes that flow into the business typically by way of the sales generated. They are figures that take no expense or overhead into consideration.
- Operating costs – They are the ongoing expenses that a firm incurs in the course of its day-to-day operations. Examples are administrative costs, cost of goods sold, and so on.
- Operating profit – Are earnings after the interests and the taxes are deducted. They give a rough peek into the overall health and profitability of the firm.
- Consolidated profit before taxes – Incorporates all the profits that are derived from other companies that the firm is related to in whichever shape or form such as subsidiaries or partnerships.
- Profit per common share – Expresses how much of the profits of a company is dedicated to the common share thereof. It roughly indicates how much profit each shareholder is bound to take home.
- Weighted-average common shares outstanding – Takes into consideration the number of outstanding shares, reporting period of the share, and the sum total thereof.
- Cash dividends declared per common share – Indicates the sum of the declared dividends that are issued out by a company for each share outstanding.
What Information Will Be Needed to Fill Out the P&L Template?
You will need the following vital pieces of information to fill out the profit and loss templates:
- Company name and address – Refer to the official name and the address of your company.
- Period covered by the profit and loss statement – Showcases the length of time, plus the start and the end dates, when the statement is in effect.
- Total sales and allowances – Display the total sales and any other allowances that may come along.
- Net sales – This is sales minus the cost of goods sold. Display this in the template clearly.
- Cost of sales – It is the value or the cost of the goods that were sold in the trading period.
- Gross margin – This is a measure or expression of the net sales revenue of a company minus the cost of the goods sold.
- Selling, general, and administrative expenses – These are other expenses besides those which are incurred when availing the goods to be sold. They include clerical and utility expenses to name but a few!
- Net operating profit – Shows the earnings of a firm after all the expenses apart from the debts, one-off items, and taxes are deducted.
- Other incomes – These maybe earnings of the company from any other source besides the sales revenues or interest incomes.
- Net profit before income taxes – This is the profit of the company before the said entity remits its corporate tax obligations.
- Net profit – It is the final profit after all the expenses and the tax obligations are deducted from the company.
Conclusion or Final Thoughts
Given the centrality of the profit and loss statement, you can never wish it away or treat it lightly. Instead, you want to read it keenly to find out what it has to offer and how you may possibly incorporate it into your business best practices.
Probably as a way out of it, we may ask you to make use of templates as they make the work of drafting one for yourself a lot easier and hassle-free. Also, see to it that you tailor this document as nearly as possible to the unique character and needs of your business.