Free Profit and Loss Statement Template - What To Know

All companies need a profit and loss statement, no matter what the size of your company is. You need to submit them quarterly and annually, so the best option is to understand what you need to do to make your statement. Not only is it compulsory, but it’s a great way to see how your company is performing, as it shows your net income, revenue, and any expenses your company has incurred.

If you’re still confused, you’ll notice a handy template available to help you get started in this article. But first, let’s go into more depth about what a profit and loss statement is and why it’s so crucial for your business.

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What is a Profit and Loss Statement, and What Does it Show?

Let’s talk about your profit and loss statement and what it shows. You use your profit and loss statement to see how your company is performing, and you may have heard of it referred to as an income statement. You’ll see your company's expenses, net income, and company revenue. 

There’s more than one name for it. Sometimes you’ll hear it be referred to as a statement of operations, a statement of profit and loss, an earnings statement, or a statement of financial performance. If you hear any of these names, your company will need to supply your profit and loss statement. 

Your profit and loss statement will show any income or revenue your company has made and the costs of any goods your company has sold. You’ll notice any expenses, so you'll have to include them if you’ve bought anything for your company. If you have a larger business, you may see that your profit and loss statement will incorporate any income they’ve gained through interest, any expected taxes, and any depreciation on expenses.

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Why Does My Company Need A Profit and Loss Statement?

If you have a public company, then it’s required that you submit your profit and loss statement quarterly or annually. You need to make sure that you submit these with your company’s balance sheet and company cash flow statement. The U.S. Securities and Exchange Commission can file them before being inspected by either an investor or a business analyst. 

By submitting your company’s profit and loss statement, your investors or lenders can see how much money your company has spent or earned. They can estimate how your business can grow and if it’s still profitable to invest in you. It’s a key indicator of your company’s financial health and great to use when you estimate your future budgets and check for past expenses that may be unnecessary altogether.

For construction companies, you’ll see what labor costs you have, and any restaurant will see what dishes are selling and what aren’t. By using a profit and loss statement, you can eliminate the items that aren’t selling and prioritize your popular items and those related to them. 

Using a profit and loss statement, you can assess new projects and help you with significant business decisions. By using it, you can see whether you can expand your business or not and whether you can hire more employees. Therefore, your profit and loss statement plays a vital role in the success of your business, so you must understand how to use them.

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How to Prepare Profit and Loss Statements—Including Template

Now that you understand why a profit and loss statement is crucial to your business, you’ll need to know how to prepare one. To help you with this, take a look at this template. But first, let’s take a look at how you’ll organize one.

Know the Time Frame

You need to choose a time frame to analyze weekly, monthly, or even quarterly. The most important thing to remember is why you’re making the statement and what you’re trying to achieve. If you want to see how your business is doing weekly, you could choose it this way. Maybe you want to check your monthly costs. You should keep these thoughts in mind when you want to look at them. Depending on how you make your statements, you may want to remember to check back regularly to help compare.

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Income 

Once you know what you want to analyze, look at any income your business has on the top of your spreadsheet. You need to know what money has come in, so see where the money’s coming from. To help you, you could put your income into different categories to see where you’re earning more.

Cost of Goods Sold

You should then look at your manufacturing costs. How much does it cost you to make items either by material or how long it takes to make them. You should remember to include any additional costs for manufacturing to make this easier for yourself.

Gross Profit and Losses

Once you know how much money you’ve earned and how much it costs, you should subtract any of the costs from your income. The best formula to do this is by doing this formula: Gross Profit/Loss = Income - Cost of Goods Sold. Knowing this formula, you’ll be able to see how much money you lose in production.

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Expenses

Your expenses will include all the essential operations you’ll have to pay out from your business. So, you’ll need to consider payroll, rent for your business, any office supplies, other bills, advertising, and any shipping costs for deliveries. 

If you want to calculate your earnings before your tax, just take your expenses from your calculated gross profit.

Net Earnings

Before this step, include any expected taxes and any depreciation or interest payments. Then, calculate your net earnings by adding everything together and taking away any interest, deprecation, taxes, and amortization. If you struggle with this, don’t hesitate to contact your accountant.

Final Thoughts

If you have any difficulties with your profit and loss statement, you can always hire an accountant and use any payroll software. Profit and loss statements are relevant to your business, so keep up to date with them to know how well your business is doing.

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