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Profit and loss statement

The profit and loss statement is a summary of a businesss income and expenses over a specific period. It should be prepared at regular intervals (usually monthly and at financial year end) to show the results of operations for a given period. Profit or loss is calculated in the following way:

Sales
Less
Sales Discounts Sales Commissions

TIP Regularly (monthly) produce profit and loss information and compare against previous months activities to ensure your profit expectations are being met.

Equals

HINT Only those businesses that have goods (products) to sell will use the calculation of cost of goods sold

Expens

Net Sales
Less
Cost of Goods Sold

Equals

Opening Stock
Calculating the cost of goods sold varies depending on whether the business is retail, wholesale, manufacturing, or a service business. In retailing and wholesaling, computing the cost of goods sold during the reporting period involves beginning and ending inventories. This, of course, includes purchases made during the reporting period. In manufacturing, it involves finished-goods inventories, plus raw materials inventories, goods-in process inventories, direct labour, and direct factory overhead costs. In the case of a service business, the revenue is being derived from the activities of individuals rather than the sale of a product and hence the calculation of cost of goods sold is a smaller task due to the low-level use of

Equals

Plus
Stock Purchases

Gross Profit
Less
Expenses (Fixed & Variable)

Equals
Stock available for sale

Less Equals Closing Stock

Net Profit

sold is a smaller task due to the low-level use of materials required to earn the income.

Joes Motorbike Tyres Profit and Loss Statement As at end of Year One Income Sales Total Sales Cost of Goods Sold Opening Stock Stock Purchases Less Closing Stock Total Cost of Goods Sold(COGS) Gross Profit Expenses Advertising Bank Service Charges Insurance Payroll Professional Fees (Legal, Accounting) Utilities & Telephone Other: Computer Software Expenses total
Calculating the cost of goods sold varies depending on whether the business is retail, wholesale, manufacturing, or a service business. In retailing and wholesaling, computing the cost of goods sold during the reporting period involves beginning and ending inventories. This, of course, includes purchases made during the reporting period. it involves goods inventories, plus raw materials inventories, goods-inprocess inventories, direct labour, and direct factory
In the case of a service business, the revenue is being derived from the activities of individuals rather than the sale of a product and hence the calculation of cost of goods sold is a smaller task due to level use of

$52,000 $52,000

$34,320 $3,120 $31,200 $20,800

$500 $120 $500 $13,000 $200 $800 $480 $15,600

Net Profit before Tax $5,200 Note; Cost of Goods Sold calculation: Towards the end of the year, Joe manages to purchase 100 more tyres on credit from his supplier for an order in the new year. This leaves him with $3,120 of stock on hand at the end of the year. Joes Cost of Goods Calculation Opening Stock Nil Add Stock Purchased during the year $34,320 (1100 tyres @ 31.20 each) Equals Stock available to sell Less Stock on hand at end of year $34,320 $ 3,120 (100 tyres @ 31.20 each)

Cost of Goods Sold $31,200 Where a business is a service business, that is, you are selling services not goods or products, then the profit and loss statement will generally not have a cost of goods sold calculation. In some instances, where labour costs can be directly attributed to sales, then you may consider including these costs as a cost of goods (services) sold.

sold is a smaller task due to level use of materials required to earn

Tyres atement r One

( 1,000 tyres @ $ 52 each)

( See note below)

chase 100 more tyres on credit from his him with $3,120 of stock on hand at the

Nil 20 (1100 tyres @ 31.20 each)

20

20 (100 tyres @ 31.20 each)

00 , you are selling services not goods or enerally not have a cost of goods sold s can be directly attributed to sales, then f goods (services) sold.

Small Business Victoria: Information sheet

Profit & Loss Statement


How to use it: Give careful thought to the headings. Expand the sales income and expenses area if your business has distinct categories (e.g. a restaurant may have food sales and beverage sales listed separately and cost of sales for each also separated).

Month Income

Jan 10

Feb 10

Mar 10

Apr 10

May 10

Jun 10

Jul 10

Aug 10

Sep 10

Oct 10

Nov 10

Dec 10

Sales Sale of goods/services Sundry Income (e.g. Commission earned, frachise fees etc.) Etc. Total Sales 0 0 Less Discounts/Commissions Sales Discounts given Sales Commissions paid Total Discounts/ Commissions Total Net Income Cost of Sales Opening Stock Stock Purchased
0 0 0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

Less Closing Stock Total Cost of Sales Gross Profit Expenses General & Administrative Bank charges Credit card commission Consultant fees Office Supplies License fees Business insurance Etc. Total General & Administrative Marketing & Promotional Advertising Promotion - General Promotion - Other Etc. Total Marketing & Promotional Operating Expenses Newspapers & magazines Parking/Taxis/Tolls Entertainment/Meals Travel/Accomodation Laundry/dry cleaning Cleaning & cleaning products Sundry supplies Equipment hire Etc. Total Operating Expenses Motor Vehicle Expenses

0 0

Fuel Vehicle service costs Tyres & other replacement costs Insurance Registrations Total Motor Vehicle Expenses Website Expenses Domain name registration Hosting expenses etc Total Website Expenses Employment Expenses Permanent Salaries/Wages PAYE Superannuation Other - Employee Benefits Recruitment costs Total Perm. Employment Expenses Casual Salaries/Wages PAYE Superannuation Other - Employee Benefits Recruitment costs Total Casual Employment Expenses Workcover Insurance Total Employment Expenses Occupancy Costs Electricity/Gas Telephones Property Insurance Rates Rent Repair & maintenance Waste removal Water Etc. Total Occupancy Costs Other Expenses

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

Total Other Expenses Total Expenses Net Profit / (Loss)

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

Total Monthly Net Profit / (Loss)

Small Business Victoria: Information sheet

Profit & Loss Statement


How to use it: Give careful thought to the headings. Expand the sales income and expenses area if your business has distinct categories (e.g. a restaurant may have food sales and beverage sales listed separately and cost of sales for each also separated).

Month Income Total Sales Less Total Disc/Comm Total Net Income
Less Total Cost of Gooods Sold

Jan 10 0 0 0 0 0

Feb 10 0 0 0 0 0

Mar 10 0 0 0 0 0

Apr 10 0 0 0 0 0

May 10 0 0 0 0 0

Jun 10 0 0 0 0 0

Jul 10 0 0 0 0 0

Aug 10 0 0 0 0 0

Sep 10 0 0 0 0 0

Oct 10 0 0 0 0 0

Nov 10 0 0 0 0 0

Dec 10 0 0 0 0 0

Gross Profit Expenses General & Administrative Marketing & Promotional Operating Expenses Motor Vehicle Expenses Website Expenses Total Employment Expenses Occupancy Costs Other Expenses Total Expenses Monthly Net Profit / (Loss) Total Monthly Net Profit / (Loss)

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

Profit and Loss Ratios


Gross Margin (Gross Profit / Net Income) Net Margin Profit / Net Income) #DIV/0! (Net #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Mark Up ((Net Income Less Cost of Goods Sold) / (Cost of Goods Sold)) x 100 Break Even ( Expenses/ ((1-Cost of Goods Sold)/ Net Income))

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Joes Motorbike Tyres Balance Sheet As at end of Year One Current Assets Cash Debtors Stock $5,100 $18,000 $3,120 Total Current Assets Non-current Assets Computer Store Fit Out Office Equipment $5,500 $8,100 $15,000 $28,600 $54,820 $26,220

Total Non-current Assets TOTAL ASSETS Current Liabilities Credit Card Creditors $5,500 $4,120 Total Current Liabilities Non-current Liabilities Total Non-current Liabilities TOTAL LIABILITIES NET ASSETS Shareholders Equity Owners Funds Current Year Profit TOTAL SHAREHOLDERS EQUITY

$9,620

$9,620 $45,200

$40,000 $5,200 $45,200

Small Business Victoria: Information sheet

Balance Sheet

This statement shows the financial position of the business "as at " a point in time

Prepare a balance sheet for the start of the business, six months later and then at the end of the first year. Draw the information from the Profit & Loss Statement and the Cash Flow Statement. A Balance Sheet brings together the results from the Profit & Loss Statement and the Cash Flow Statement. (Download it from the Financial Management section of the Business Victoria website at www.business.vic.gov.au.) How to use it: Fill in the figures below, expanding or reducing the assets, liabilities and shareholders equity areas.

Month
Assets Current Assets
Cash on hand Debtors Prepaid Expenses General Rates Workcover Insurance Etc. Total Prepaid expenses Inventory Bikes Parts Etc. Total Inventory Short term Investments Other current assets

Start of Business

Jun 10

Dec 10

Total Current Assets Fixed Assets


Computer Store Fit Out Office Equipment Leasehold Buildings & improvements Furniture & Fixtures Etc.

Total Fixed Assets Total Assets Liabilities Current Liabilities


Bank Overdraft Credit Card Debt Creditors GST collected

0 0

0 0

0 0

Superannuation PAYG Witholding Payable Workcover Insurance Payable Current portion of long term debt Etc.

Total Current Liabilities Long Term Liabilities


Motor Vehicle Loan Equipment Finance Long term Loans

Total Long Term Liabilities Total Liabilities Net Assets Shareholders Funds ( Equity)
Owners Funds Retained Earnings Current Year Profit

0 0 0

0 0 0

0 0 0

Total Shareholders Funds (Equity) Balance Sheet Ratios


Current Ratio (Current Assets / Current Liabilities) Quick Ratio ( Current Assets less inventory) / (Current Liabilities less bank overdraft) Working Capital Funds (Current Assets Less Current Liabilities) Leverage Ratio (Total Liabilities / Total Assets) Debt to Equity Ratio Liabilities / Total Shareholders Funds) (Total #DIV/0! #DIV/0! #DIV/0!

#DIV/0! #DIV/0! 0 0 #DIV/0! #DIV/0!

#DIV/0! #DIV/0! 0 #DIV/0! #DIV/0!

#DIV/0!

Cash Flow Statement


For the Year Ending Cash at Beginning of Year

Cashflows from Operations


Cash receipts from customers (enter positive amounts) Cash Sales Cash collected from customers (debtors) Funding from Creditors Stock purchased, not yet paid Cash paid for (enter negative amounts) Total Expenses Inventory (stock)purchases Funding to Debtors Sales made not yet collected

Net Cash Flow from Operations Investing Activities


Cash receipts from
(enter positive amounts)

Sale of property and equipment Matured Investments Purchase of property and equipment Purchase of investments

Cash paid for


(enter negative amounts)

Net Cash Flow from Investing Activities


[42]

Financing Activities
Cash receipts from
(enter positive amounts)

Increase in short term debt Increase in long term debt Increase in equity (proceeds from owners) Repayment of loans Dividends

Cash paid for


(enter negative amounts)

Net Cash Flow from Financing Activities Net Increase in Cash


Cash at End of Year