All business owners should have a firm understanding of their companies financial statements, or a bookkeeper responsible for keeping documents organized and up to date. Heartfelt CFO and Tax Services provides accounting and bookkeeper services to some of NYC’s top businesses. Here you can find insights on what a profit and loss statement is and how proper analysis can help to grow your business.
What Makes up a Profit and Loss Statement?
A profit and loss statement also known as an income statement, is a document summarizing your company’s revenues and expenses. Profit and loss statements allow your business to report how much money is being spent vs. how much the business is bringing in.
All profit and loss statements consist of the following components:
- Cost of Goods Sold
- Gross Profit
- Net Profit
How to calculate Gross Profit and Net Profit
Total Revenue – Total Cost of Goods = Gross Profit
Gross Porfit – Business Expense = Net Profit
What qualifies as a Business Expense?
- Cost of Goods or Services Sold
- Operating expenses
- Interest paid
- Meals and lodging
Additional Business Expenses you Qualify for
- Bank Fees
- Supplies and materials
- Moving machinery
- Donations to business organizations
- Education expense
Business Expenses that don’t Quality for a Deduction
- Lobbying expenses
- Political contributions
- Charitable contributions
- Personal living
- Family expenses
How can I organize my profit and loss statement correctly?
Organizing your profit and loss statement starts with the tracking dates. Income statements are generated monthly, quarterly and annually. Monthly reports will allow you to track revenues and expenses, helping you figure out where you need to cut costs if necessary. Transactions should be organized by either a revenue or expense.
After identifying if it’s a revenue or expense, you can organize these transaction details by date, invoice number, type of transaction or details that provide further insight. Breaking your revenues and expense into subcategories is a great tip for managing transactions. The best way to organize your financial statements is to hire a certified bookkeeper to handle your documents. If you own a business your concern should be growth and customer satisfaction, not managing your finances. Using Heartfelt CFO and Tax Services for yourbookkeeping needs, will allow us to analyze your spending and help create a plan for a successful financial future.
Analyzing your income statements is our speciality. We have a team of expert accountants and bookkeepers who can help keep your business finances on track. Contact us today for more information on our bookkeeping services.