Every company needs to monitor its various expenditures, its income sources and the profit and loss over a certain period of time. They also need to maintain records of the same in a business profit and loss statement. The calculations are usually finalized at the end of each quarter and at the end of the accounting year of the business. This is essential because it gives a good idea as to where the company stands.
6 Steps to Creating Profit and Loss Statements
Step 1: Choose an Application
You can use various applications to create your profit and loss statements. You can use just excel and show all your calculations there or you can use MS Word and insert tables. Using excel is the preferred method. However, the best possible approach would be to create the charts and graphs in excel and import them to MS Word. Here you can make the document look cleaner.
Step 2: Create the Basic Structure
For this example let us use MS Word (or any document editor for that matter) to keep things simple. Write down the various details of your company at the top of the document. Then write “Business Profit and Statement” (as heading 1) on the next line. Then on a new line add the business year (in bold) for which you are making the calculations.
Step 3: Write the Revenue Sources
Type ‘Income’ and then change its format to ‘heading 2’. Then create a table with two columns. For the first column give the heading ‘Sources’ and on the second column give the heading ‘Amount’. Fill out the subsequent rows with the relevant details.
Step 4: Write Down the Total for the Income
Once you are done with populating the source and amount fields, calculate the total and write it down separately below the table. You can also use the last row and change the border color of that particular row to white to make it look even better.
Step 5: Calculate the Expenses
You just need to follow almost the same processes that you use to create the income model. But instead of income write ‘Expenditure’. This is probably going to be a lengthier table than the last once. Write down the total just like you did the last time.
Step 6: Calculate the Profit and Loss
Try to make the tables as detailed as possible because the better idea you have regarding where the money is going the better you will be able to manage it. Now that you have the total expenditure and income figures at your hand it is time to calculate the difference and figure out whether your company is running a profit or suffering a loss.
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