Any business organization that is active and functional, is required to maintain and publish its different financial statements. These financial statements are a reflection of the company's financial standing. It also gives a good idea to the consumers about whether or not the company is worth investing in. As for the company, apart from being mandatory by law, the financial statements also serve as a note to themselves about where and how their money is being spent and how and what are the things they can do in order to minimize losses and maximize profits. The statement that is responsible for this reflection of cashflow within and outside the organization is the profit and loss statement. In this article, you will get a template that will help you to understand it better.
What is the Profit and Loss Statement
As mentioned earlier, book keeping is an important function of the finance department of any organization. And the statement that gives an accurate idea of how much money has been spent and how much money has come into the firm as a result of the sales is the profit and loss statement. The statement has two sides, one which records all the revenues that the company has accumulated over the particular period (generally one year). This helps in finding out the gross profit or loss of that period. From this amount, all the expenses incurred are subtracted. When this is done, the sum that remains is the final net profit or loss. This is the amount which is carried forward to the other accounts for further accounting purposes. Most of the common revenues and expenses that are present in the profit and loss account are mentioned in the template below.
In this section, we will touch upon the major items that are present in the profit and loss account. This includes the various items that qualify as the revenues accrued and also the expenses that have been incurred in the same period of time. Let us see a template to understand it better.
|Name of Business Organization
Address of Organization
|Profit and Loss Statement
for the period ______ to ______
|(-)Cost of Goods Sold||_____________|
|Accounting and Legal Fees||_____________|
|Printing and Stationery||_____________|
|Repairs and Maintenance||_____________|
|Rent for Premises||_____________|
|Telephone and Communication||_____________|
|Cost of Hired Equipment||_____________|
|Any Other Expenses||_____________|
The template given above can serve as a basis for you when you're trying to understand what are the components in a profit and loss statement. As you can see, first all the revenues are totaled. These revenues include amounts derived purely from sales and services activities. After that, any cost that was incurred to bring about the implementation of the sales is subtracted from this amount. By doing this, we arrive at the gross profit or loss (profit or loss before deducting expenses). In the next section, you add up all the expenses that are incurred in the production process. All these amounts are totaled as the overall expenses. Now, this amount is deducted from the gross profit arrived at earlier. When we do this, we reach a figure which is the final profit or loss (net profit or loss) after the deduction of the production costs. This amount is what helps in making other financial statements of the organization.
This template given above can be copied into a Microsoft Excel sheet and printed out. All you need to do is add the relevant amounts by adding or reducing the number of cells according to your needs.