Universal Bookkeeping Reports: Probe the Profit & Loss

As a business owner you will see your Balance Sheet, Profit & Loss and Cash Flow Statement regularly. How are these reports connected?

Profit & Loss Statement: separating your revenue from your expenses. The result is your net profit and this figure is also the current year earnings displayed on your Balance Sheet.

As this video demonstrates, the beauty of cloud reporting is that you can click on a figure and it will drill down to show you more data on that number. Regularly examining these reports and comparing them over periods of time will allow you to identify trends and weaknesses in your business financials.

Transcript: This is Annabella from Numeri. Here is a 2 minute guide to understanding your Profit and Loss Statement and how it can benefit you as you analyse your data. Like any budget, a Profit and Loss Statement separates what you earn from what you spend. Using QuickBooks today the first total line item is the income: this is revenue that has been invoiced to clients and we can see that this figure is made up of services and sales of products. Your expenses are divided between your cost of sales and your operational expenses. The reason for this is so you can see how your resources are being used. Cost of sales or cost of goods sold sold refers to items that have been purchased in order for you to make a sale, for example if we drill down on this revenue figure sales of product income we can see that it's made up of water bottles and name badges that have been sold. Likewise, when we look at the corresponding account in cost of sales we can see that that total figure is what has been spent on the same items so we see a nice correlation between the two accounts. Your operational expenses are also called fixed costs: they would have occurred whether you had made any sales or not. Now when we add these two figures the cost of sales and expenses, and subtract that from the total income we get your Total Net Earnings or Net Profit and you will find this figure as the Current Year Earnings in the Equity section of the Balance Sheet which is a nice example of how the two reports work together. Would you like to know more? Please send me a message so that we can get in touch.