The profit and loss statement is one of the most important financial documents of any company. It consists of a summary of revenues, costs, and expenses for a specific business period usually for a fiscal year.
The profit and loss statement template is similar to the income statement template. This type of financial documents is used to analyze the financial stability of a business.
Also, it assesses the ability of a business to generate profit by managing revenue, costs or both.
This statement sometimes also referred to as earning, income, financial results, expense or profit and loss statement.
The purpose of the profit and loss statement template is to manage the revenue and cost of a business to generate profit and eliminate the probability of loss for any period of time. You may also like Debt Snowball Spreadsheet Templates.
Purpose of Profit and Loss Statement Template
The basic purpose of using profit and loss statement template is to check the profitability and sustainability of the business.
So, a resultant profit in the income statement means the business is revenue more than its expenses. On the other hand, a loss means the expenses are more than the revenue of the business.
Therefore, the profit and loss statement is used to answer a lot of questions such as;
- Is there enough revenue generated by the business to cover the costs?
- How much is the return of investment for the expenses of the business?
- Is the business profitable?
While profit and loss statement template can be used to record the top and lowest-earning revenue and spending. Also, it calculates the gross margin of business by dividing the costs of goods sold by generated revenue.
Moreover, the profit and loss statement template presents the factors impacting the growth and profitability of the business.
What is present on the Profit and Loss Statement Template?
There is a specific set of information that must be present on the profit and loss statement template. So, to achieve all the benefits mentioned in the above section. The profit and loss statement template has the following major sections. You should also check Stock Certificate Template.
- Cost of Goods Sold
- Gross Profit
- Net Operating Income
- Other Income
- Other Costs/Expenses
- Net Other Income
- Net Income
Each of the above sections is sub-categorized. Income section enlists all the sources that generate revenue for the business.
While the other income sources can be anything that isn’t directly linked to the core competencies of the business but generates some revenue.
Expenses record the list of all costs incurred by a business to produce the products. While other expenses may include anything such as taxes and penalties.
The net income of the business can be calculated by extracting the cost of goods sold, expenses, and other expenses from the sum of income and other income of the business.
What isn’t shown on a Profit and Loss Statement Template?
To differentiate between the profit and loss statement and other financial statements. It is important to keep the information within a specified limit to make it effective. You can also free download Monthly Financial Management Report Template.
The information that must be present on a profit and loss statement template is revenue, costs, and cost of goods sold. While the profit and loss statement should include any information about the assets, liabilities, and equity of the business.