Q:

How do I calculate profit and loss?

A:

Quick Answer

To calculate profit and loss, evaluate revenue, cost of goods sold and the expenses incurred, then subtract cost of goods sold and expenses from sales. A positive result denoted profit, while a negative result indicates loss.

Continue Reading

Full Answer

  1. Calculate revenue

    Calculate the income generated for the entity. The income is in the form of sales made if the entity trades or in the form of fees if a service is involved. Invoices and bills issued are the primary sources for getting revenue figures.

  2. Calculate cost of goods sold

    Calculate the cost of goods sold if the entity is part of a trading scenario. Use the formula Cost of goods = Opening stock + Purchases - Closing stock.

  3. Calculate Expenses

    Expenses include all costs that were incurred in order to make sure that revenue was generated. Calculate fixed costs which the entity incurred despite the level of its activities. Make a list of all such costs and sum the figures to obtain a value for expenses.

  4. Calculate profit and loss

    Add the cost of goods sold and expenses, then subtract the sum from revenue. A positive value indicates surplus amount and is called profit, while a negative answer points towards a deficiency and is termed as loss.

Learn more about Financial Calculations

Related Questions

  • Q:

    How do you make a profit and loss sheet?

    A:

    To prepare a profit and loss sheet, start with the total income or revenue of the business or company and subtract the cost of goods or products. This gross profit value must then be subtracted by all the expenses of the company, resulting in a net profit or loss.

    Full Answer >
    Filed Under:
  • Q:

    How do you prepare a profit and loss statement?

    A:

    Preparing a profit and loss statement for a business entails calculating the net profit by knowing information, such as revenue, net sales, cost of goods, gross margin and operating expense for a certain period of time, as noted by the Edward Lowe Foundation. To prepare a P & L statement, which is also called an income statement, it is important to know what different terms mean and any equations needed to determine the net profit.

    Full Answer >
    Filed Under:
  • Q:

    How do you work out a profit margin?

    A:

    Work out a profit margin by dividing a measure of the company's profitability by the revenue, or sales, figure. There are a few different calculations for profit margins, depending on what data is required

    Full Answer >
    Filed Under:
  • Q:

    What is the formula to figure out price based on margin percentage and cost?

    A:

    Optimal sales price is calculated as the necessary revenue to achieve a desired profit margin divided by the quantity of product units forecast to sell, explains small-business writer Gregory Hamel. A profit margin is the proportion of sales profit a business generates from revenue after subtracting production costs.

    Full Answer >
    Filed Under:

Explore