Most of business owners are more concern to the business work, especially in marketing task on the early phase of their business. While the accounting task could be done as the business is growing well or leave it to their employees. It shows that those business owners got difficulty in interpreting the monthly financial reports or have no idea how to make them.
In the financial accounting, income statement or profit loss statement is part of the financial report in a business generated during specified accounting period. This reports describes the elements of company’s revenue and expenses and resulting a net profit or loss. Understanding the income statement is necessary for business owner, since the profit information is the crucial information for investors to take investment or managerial decisions. The profit management is to manage the revenue, expenses, profit or loss to gain desired earning without breaking the accounting standards requirements.
Basically, profit and loss report applies a simple formula, that is sales minus costs equals to profit. The rest is about deploying the sales or cost into more detail. Sales are typically stated on the top of the Profit and Loss, while costs are stated below sales and profit is at the bottom.
The Profit and Loss report works for:
- Investor: as the information regarding to the previous business earning and crucial to forecast the profit and loss cash flow.
- Creditors: assess the debtor capability in generating cash flow to pay interest and loan
- Management: to provide manager bonuses when company targets are achieved
Since the accuracy in Profit and Loss is critical for your business, it is best to use accounting software like Zahir Accounting to help you prepare the financial reports. Zahir Accounting is a user friendly software that everyone can operate even without accounting background. Implementing Zahir Accounting in your business will help you to manage your time and produce proper financial reports.
