Knowing business revenues and expenses is crucial, it determines the condition of the business. You have to create a profit loss statement to analyze these two business elements simpler. So, how to create a profit loss statement for your business? Check the steps below.
Calculate the Revenue
Profit Loss Statement consists of two crucial elements which are revenue and expense. So, the first thing to do to create a profit loss statement is by calculating the revenue. The calculation depends on the time range. Let’s say you can check the profit loss statement per three months or weeks. Revenue means the income the business earns such as sales, services, and many more.
Calculate the Cost of the Product and Get a Gross Profit
The cost of the product is the next thing you have to calculate. The cost of the product is the original cost. It is the total cost you spend to create or buy a product. You need to calculate the cost of the product because you have to subtract the result from the total revenue you earn.
The subtraction between the cost of the product and the revenue is known as a gross profit. If the revenue is smaller than the cost of the product it means you receive a gross loss. On the other hand, you receive a gross profit if the revenue is bigger than the cost of the product. It is how to create a profit loss statement simply.
Calculate the Operating Expenses and Get the Operating Profit
Your job is not done yet because you still have to calculate the operating expenses. The things that are on this list are including rent, travel, payroll, equipment, and many more. Then, subtract the total of the operating expenses from gross profit. The result is the operating profit.
You get operating profit if the gross profit is bigger than the operating expenses. In contrast, your business suffers from operating loss if the gross profit is lower than the operating expenses.
Profit and Loss Statement Template
Nowadays, you don’t need to classify the points one by one. All you have to do is download the profit and loss statement template. You may download a simple profit and loss statement template for a small business. The template classifies the point into two which are the income and expenses. Write down all the money you earn from the business in the income table. Then, make a list of the money you have to use in the expenses table.
Calculate the total of the income and expenses. Your business is healthy and gets profit if the total of the income is bigger than the expenses and vise versa. Subtract the total of the income from the total of expenses to get the total profit or loss that your business earns.
The process will be much easier if you have a profit and loss statement template. Indeed, learn how to create a profit loss statement is crucial for your business. The most important thing is that you use the statement regularly to check the condition of your business.