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# How Do You Make a Profit and Loss Balance Sheet?

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A balance sheet and profit and loss report are actually two separate statements, notes the Houston Chronicle. To prepare a balance sheet, list all accounts, and utilize the fundamental accounting equation, notes both the TD Bank and QuickBooks websites. To prepare a profit and loss statement, utilize spreadsheet or financial software to list all revenue and expense accounts, and then calculate the net total.

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The fundamental accounting statement for a balance sheet states that owner's equity is equal to the difference of assets less liabilities, notes QuickBooks. Create three categories, and label them assets, liabilities and shareholder's equity. Common asset items include cash, accounts receivable and inventory. Liability accounts include accounts payable, payroll taxes withheld and loans payable. Equity accounts include retained earnings and capital stock. Enter the associated amounts for each account, and ensure that the totals comply with the fundamental accounting equation. Utilize the TD Bank website to enter sample items into a balance sheet.

To create a profit and loss statement, prepare a table, and give it a title. Profit and loss statements are for a particular period, so be sure to list the period as well, notes the Houston Chronicle. Enter the net sales in the first row. Utilize the next lines to enter information related to cost of goods sold and other expenses. Subtract the expenses from income to arrive at gross margin. Underneath the gross margin, add a line for taxes, and then subtract taxes from gross margin to arrive at net income.

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