8 Steps to Creating a Profit and Loss Statement

A profit and loss statement provides businesses with a view of revenue, expenses, and income over a specified time frame. This step-by-step guide explains how to create a profit and loss statement.

Designed to provide business owners with revenue and expense details, the profit and loss statement, or P&L statement, is a must for business owners, whether you’re a small business bookkeeper, or the head of a global conglomerate.

Overview: What is a profit and loss statement?

Like a cash flow statement, a profit and loss statement provides you with detailed information regarding both revenues and expenses for your business.

Also known in accounting terms as an income statement, even a basic profit and loss statement can provide you with a convenient window through which you can view your company’s revenue and expenses.

In addition, profit and loss statements can also be a useful tool for creating a budget or calculating your working capital.

determine gross profit

Once you have calculated your revenue and your cost of goods sold, you’ll just need to subtract the cost of goods sold to arrive at your gross profit number. Gross profit is the profit your business has earned from selling your products and/or services.

Revenue - Cost of Goods Sold = Gross Profit/Loss

Step 4: Calculate operating expenses

The next thing you need to do is calculate all of your operating expenses. Operating expenses include rent, travel, payroll, equipment, utilities, and postage.

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.

Even sole proprietors need to know how profitable their business is, and FreshBooks does a good job of providing business owners with the reports they need to make good management decisions.

FreshBooks offers four plans, all include product support and solid reporting capability:

1. Lite: The Lite plan is $15/month and supports up to 5 billable clients.
2. Plus: The Plus plan runs $25/month and supports up to 50 billable clients.
3. Premium: Premium is $50/month and supports up to 500 billable clients.
4. Select: The Select plan is custom-priced and supports more than 500 billable clients.

3. OneUp

OneUp is an affordable, easy to use accounting software application well suited for sole proprietors, freelancers, and small business owners. Offered on the cloud, OneUp works on desktop systems, laptops, and all mobile devices.

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