| Profit and Loss Statement |
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Profit and loss statement, commonly called income statement, is a financial report which contains information about the final result of a business operation in a specific time. This report will show you how much profit you earn or how much loss you make in a structured form of statement. A profit and loss statement includes all types of revenues and expenses made during a certain period of time. Objectives of Profit and Loss Statement By creating a profit and loss statement, a company can indicate whether the business runs well or not. Is there any profit yet? What kind of expense that has made the company gained losses? All these questions will be answered by reading the profit and loss statement. Looking the performance of the company through a profit and loss statement, a business person can make an informed decision for their business. Profit is a good sign that the business is improving, for example, that the owner may then take a step to expand its markets or to purchase certain tools to upgrade its services.
Elements of a Profit and Loss Statement There are four elements that make a profit and loss statement. Those elements are: 1. Revenues. Revenues are all incomings of your business. They could be the results of products or services sales or any development of your business. 2. Expenses. Any costs and assets outgoings are included in expenses. The expense may be made through your delivering of your products or services or the process of production. Advertising costs, rent costs, employees wages, office equipments and insurance are some examples you can put in your expenses list. 3. Profits or Gains. Profits signal the improvement of net assets of your company. Profits can be attained from any transactions except those results from owners’ revenues and investments. Make use the profits in a way that they may improve your business and generate more. 4. Losses. Losses mean your assets are decreasing. Losses occur when the amount of expenses goes beyond the revenues. This condition should be well noticed and taken care of otherwise it may cause the collapse of the business. There is a lot of information you can see from a profit and loss statement. One of them is total revenues of your company which are generated from selling goods and services. Profit and loss statements also show you discounts given by other companies, returns of products, and the amount of sold goods. The key point is the statement shows whether your business gains losses or profits; important information that can be used as a decision making in the future.
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