How to Prepare a Profit and Loss Statement Free Template

profit and loss statement

The final step is to deduct taxes, which finally produces the net income for the period measured. Fundera’s Crucial Accounting Tips For Small Start-up Business template (shown above) can help you create a P&L statement in Microsoft Excel or Google Sheets. Microsoft Office, QuickBooks, and other sites also have Excel templates you can use as well. Before you can create and analyze your own profit and loss statement, it’s important to understand what’s included in this report and how it works. Your income statement is the most important financial statement for your business.

profit and loss statement

Place your net profit margins on a graph to see the information in context. You’ll discover big-picture insights, general business trends, and increasing or decreasing profit margins. You can use this information to forecast your business direction and compare it with other companies’ public financial statements. This single step is perfect for small businesses and sole proprietorships.

What Is a Profit and Loss Statement?

Operating earnings measure how profitable your business is, without taking into account external costs, like interest payments, taxes, depreciation, and amortization. We’ve created a single-step profit and loss statement for an imaginary business—Bench Bakery, a small pastry shop. Here we show you how to break down a P&L statement—how each line item interacts and what they mean for your company’s financial performance.

  • Such statements provide an ongoing record of a company’s financial condition and are used by creditors, market analysts and investors to evaluate a company’s financial soundness and growth potential.
  • Expenses are deducted from revenue to provide the net income or net loss.
  • The inner financial workings of a company are of great interest to numerous people, including accountants, economists, and investors.
  • The profit loss statement can be run at any time of the fiscal year to determine profitability and compare one period of time to another to show growth.
  • The monthly tab also has a chart that tracks month-to-month changes in total revenue and total expenses.
  • Use this visually dynamic retail P&L template to determine your store’s profits or losses over any customized period of time.

Investors and analysts use financial statements to assess the financial health of a company and its growth potential. A profit and loss (P&L) statement is one of the three types of financial statements prepared by companies. The purpose of the P&L statement is to show a company’s revenues and expenditures over a specified period of time, usually over one fiscal year.

Example of a P&L Statement

If you’re not using accounting software to generate a P&L statement you might find it easier to utilize a profit and loss statement template. This will help ensure you’re following the right steps as you prepare your form. Various financial websites and accounting software from companies such as QuickBooks, Wave, and Mint provide templates for your various financial statements, including the P&L statement. The P&L statement paints a comprehensive picture of how much money a company made and spent and whether it is profitable or suffered a loss. To ensure a proper understanding of profitability, accountants use accrual accounting to prepare the P&L statement.

profit and loss statement

There’s a lot of financial data for you to include in your P&L statement. Finding a starting point can be intimidating, but it’s much less so if you already have a great bookkeeping system in place. If you do, you should have easy access to your company’s receipts, invoices, pay stubs, credit card payments, tax data, accrued interest, and more so you can sit down and start running the numbers. The steps above show you how to create a simple, straightforward income statement.

Annual Profit and Loss Sample Template

Just keep in mind that a profit and loss statement example like this one only shows you the finished product. As we mentioned above, one of the tougher parts is going to be ensuring that your figures are correct on the P&L statement. This is why having accounting software and a great business bookkeeper or accountant is essential—they’ll make sure that’s the case. A P&L statement shows investors and other interested parties the amount of a company’s profit or loss. Revenue and expenses are shown when they occur, not when the money actually moves into or out of the company’s bank account.

profit and loss statement

For example, if you sold $200,000 in merchandise—your total revenue—but you ran a sale and had some returns. The last line of your P&L indicates whether you’re “in the black” (earnings were greater than expenses) or “in the red” (expenses were greater than earnings). The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters. FreshBooks is a small business accounting application that offers a long list of features geared toward sole proprietors and very small businesses. Offering online access as well as a mobile app for both iOS and Android devices, Freshbooks lets you collaborate with your employees, contractors, and accountants. Indirect expenses—for instance, utilities, bank fees, and rent—aren’t included in COGS.