A profit and loss statement is usually designed to measure the sales and expenses of the company for a specific period. An income statement is usually designed to total all review sources and subtract all expenses related to the revenue. It will help your company to evaluate its financial progress during a specific period. A profit and loss statement will help you to get information about the flows of money. It is one of the important financial statements and is used during the analytical process. It is the best tool that will help investors to take investment decisions in your company. It is an important accounting statement so you have to design it carefully. Make sure to carefully evaluate all figures to get an accurate picture of your profit and loss statement.
Here is a preview of a sample and free Profit and Loss Statement Template created using MS Excel,
Tips to Design Profit and Loss Statement
It is an essential financial statement therefore it should be designed carefully for your help, I am going to share some tips to design a profit and loss statement:
- It is essential to write the name of your organization at the start of your statement. Write the name of your organization followed by the period of profit and loss statement.
- Write a figure for net sales that should be the total sales of the company during the period being analyzed minus any allowances or returns and trade discounts. Calculate the cost of goods sold which is also known as the cost of sales. If you are a retailer or wholesaler then the cost of goods sold will be the total price paid for the sold products during the accounting period. You can use the following formula to get the cost of goods sold:
Cost of goods sold = Beginning Inventory + Inventory Purchased during the Period – Inventory on hand at the end of the period.
- Fill the cost of sale for your company and get the gross margin. It will be easy to calculate gross margin for the accounting period after getting the cost of sales and net sales. Gross margin is also known as gross profit and can be calculated as:
Net Sales – Cost of Goods Sold = Gross Margin
- You can calculate gross margin with the help of selling and administrative expenses. Selling expenses are incurred directly and indirectly in making sales. These expenses are related to taking orders and fulfilling these orders.
- General and administrative expenses are also known as operating expenses that have no direct link with the sales of goods and these expenses are also known as overhead expenses. It is time to enter total selling, administrative and general expenses.
- Now enter the net operating profit and use the following formula for its calculation: “Net Operating Profit + (Other Income – Other Expenses) = Net Profit before Income taxes”.
- You have to enter the details of other income or expenses for your business to calculate the net profit before income taxes. You can calculate the net profit by subtracting the state and federal income taxes from profit before income taxes. That can be done with “Net Profit before Income Taxes – Income Taxes = Net Profit”.
- Record the figure of net profit after tax in this formula, “Net Profit Before taxes – Provision for Income Tax = Net Profit After Income Tax”.
Here is the download link for this Profit and Loss Statement Template,