What’s A Profit And Loss Statement And How Does It Work?

First, start by filling out your business name at the top of your sheet, followed by the period of time the data is for. This could mean you’re preparing a monthly, quarterly, or yearly income statement. Then you can start gathering the numbers that represent the variety of income your business generates. The sales and revenue that you gather should be the net income amounts — that is the sales before taxes — and placed at the top of your profit and loss statement. These sales can be broken down into categories, such as net product sales or net service sales, for example. After all the data is collected you can add them up in order to get your total net sales final calculations


Next, gather all of your expenses and place them under the category of “operating expenses.” This can include sub-categories, such as your cost of goods sold, marketing expenses, office supplies, and rent. After all of your expenses are broken down and added up, then you can calculate your total operating expenses. Lastly, deduct any income taxes or interest that you owe. For your final calculations, you take your “total net sales” minus your “total operating expenses” minus your “taxes,” and if your final number is positive, then your company has a recorded net earnings amount. If it’s a negative number, then you will have a net loss.