It is important to know the financial state of your business. We know that reading these financial reports may not be as simple as one would think. For this week’s Financial Reporting topic, let’s focus on the biggest one of all – the Profit and Loss Statement.
What is a P&L Statement?
A Profit and Loss Statement is also known as a P&L. A P&L is a generated financial statement that summarizes how your business is doing. The P&L outlines the sales and expenses. This will help you determine how profitable the business is doing during a specific time period. For example, if you are looking at a P&L statement for September, it will generate the sales made in September. It will also generate the expenses made in September. The Net Total subtracts the expenses from the sales to how well business is.
Why is a Profit and Loss Statement Important?
A P&L is important because it is the quickest way to see an overview of your company’s financial data. It is very important that the financial data is accurate. Reviewing the report is strongly recommended to catch for discrepancies as early as possible.
Where are the information gathered from?
The information gathered on a Profit and Loss statement are sales and expenses that have already been tracked in. When setting up the Chart of Accounts for your file, each account has to be determined as an expense, sales, bank account, and etc. Once the Chart of Accounts have been set up, each transaction will be categorized to an account and the information will be pulled when you prepare the P&L.
Please note that the information your P&L provides can only be as accurate as the information you collect and record through bookkeeping and accounting. Let us help your accounting needs so that generating an accurate P&L can be a breeze. Call us at (916) 480-1225 or click here to have us contact you!