Q:

How do you use a profit and loss sheet example?

A:

Quick Answer

To use a profit and loss sheet example, list all revenue or sales items and then all expense items, notes the Australian Government website. Net profit is the difference between the total sales and expenses.

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Full Answer

In the sales section, total sales less cost of goods sold represents the gross profit, notes the Australian Government website. Common expense items include fees, interest, utilities, insurance and wages. The profit and loss statement is also known as the income statement or the statement of operations, notes the Houston Chronicle. The statements can represent data on a weekly, monthly, quarterly or yearly basis. It is important to use the same profit and loss format each period for comparative purposes.

Users of profit and loss statements must manage the balances to keep earnings positive and expenses under control, notes the Houston Chronicle. It is important to establish certain benchmarks within reason when preparing the profit and loss statement; in some instances, it is necessary to have an accountant review the material. Another approach is to generate a profit and loss statement that shows each expense as a percentage of total sales. After analyzing amounts, a user of the profit and loss statement can make decisions to sell certain assets or discontinue investments.

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