How do you prepare profit and loss statement?

Answer 1

How to Prepare a Profit & Loss StatementA profit and loss statement measures a company's sales and expenses during a specified period of time. The purpose of a profit and loss statement is to total all sources of revenue and subtract all expenses related to the revenue. It shows a company's financial progress during the time period being examined.

Instructions

Things You'll Need:

· Net sales info

· Cost of goods sold info

· Selling and administrative expenses info

· Other income and other expense info

1. Step 1

Enter your company's name in the header of the statement. In addition, add the period the profit and loss statement will reflect.

2. Step 2

Enter data for net sales. The company's net sales are the total sales during the time period being analyzed minus any allowances for returns and trade discounts. The amount allowed for returns will vary depending on what type of business you are running. Calculate the cost of goods sold. The company's cost of goods sold is also called the cost of sales. If you are a retailer or a wholesaler, it is the total price paid for the products sold during the accounting period. To calculate the cost of goods sold you will use the following calculation below and record the data:Beginning inventory + Inventory purchased during the period− Inventory on hand at the end of the period________________________________________ Inventory used for product the time period

3. Step 3

Fill in the cost of sales for your company. Once net sales and cost of goods sold are entered on the P & L statement, it is possible to compute the gross margin for the accounting period. Gross margin is also referred to as gross profit. Net Sales − Cost of Goods Sold = Gross Margin

4. Step 4

Calculate the gross margin using selling and administrative expenses. Selling expenses are expenses incurred directly and indirectly in making sales. They are the expenses of order taking and order fulfilling. General and administrative expenses are operating expenses not directly associated with the sale of goods. They are also called "overhead" expenses.

5. Step 5

Enter total selling, administrative, and general expenses.

6. Step 6

Enter the net operating profit. To calculate it, use the following formula: Net Operating profit + (other Income − other expenses) = net profit before income taxes

7. Step 7

Enter any other income or other expense for your business on the worksheet and calculate the net profit before income taxes. Net profit is calculated by subtracting what you estimate is owed for state and federal income taxes from net profit before income taxes. Net Profit before income taxes − income taxes = net profit

8. Step 8

Record net profit after income tax.Net profit before taxes-provision for income tax= net profit after income tax