How to Prepare a Balance Sheet Report In QuickBooks Like a CPA
For a business it is highly important to know their source of income as well as the business operations money is being spent on. This helps you to focus on your best source of income and control the expenses, so that the profit can be increased in future.
The Income Statement or a Profit & Loss (P&L) statement/report is a recap of your company’s total income and expenses over a particular time period. QuickBooks users can consider QuickBooks balance sheet report as an example of this to understand better. This can be monthly, quarterly or annually and it completely depends on for what period you would like to analyze your income and expenses .The period you choose depends on your needs.
For example if you use the income statement to review your operations, select any period that works for you and this may be quarterly or even monthly. But if you need the statement for a loan application, it is year-to-date and typically ends with the latest month; you will likely have to provide a statement for the prior full year as well.
What all an Income Statement or a Profit & Loss (P&L) statement/report includes on it
- Revenue: – Revenue is all income that a company receives. Generally this includes the following:
- Operating revenue from the sale of goods and services
- Non-operating revenue like interest received on loans made by the company or rent obained from subleasing space
- Gains on the sale of long-term assets (for example a vehicle, building, etc.) or other gains (for example a lawsuit recovery).
Note:- Revenue on the income statement is reported when the goods or services have been received by the customer. Also, revenue for this purpose does not depend upon the receipt of payment, if your business is accrual basis. For example, if you perform a service, account for revenue is affected when the work gets done, irrespective of whether you have received payment or not. Similarly, if you are a retailer selling goods, report the complete revenue on your income statement once the goods are totally sold, even though the invoice for the transaction has not been paid yet. If you get paid on the spot via options like cash, a check, a credit or debit card payment, or other options like wire/electronic transfer, then you need to understand that receipts and revenue are the same for the purposes of your income statement.
- Expenses:- List and then sum up all yourexpenses incurred to calculate your company’s revenue. Separate your expenses into different categories to knowyou’re your money is being spent. Following are the typical categories of expenses
- The cost of goods sold if you have Inventory Items, payroll, overhead (for example rent, utilities, insurance, communication costs, etc.) and marketing
- Interest expense, which accounts for interest payable for debt, such as loans, lines of credit, etc
- Losses on the sale of assets and damages. Losses reported on the income statement are the amount by which the proceeds are less than the asset’s value on the company’s books.
Some expenses are matched to revenue for reporting purposes. Consider for example, commissions that are owed to a specific salesperson get reported when the revenue from the sales are reported, no matter whether the commissions have been paid or not. Similarly, inventory cost is accounted in COGS account with the sales of inventory items.
All payments made by a company are not usually treated as expenses on an income statement. Consider for example, when you pay down principal on your loan is a simple outlay of cash but that cannot be treated as an expense on the income statement. Also, there may be some extraordinary expenses that you may want to display in some separate revenue category in order to highlight them and better understand your total income & expenses for that period.
Creating an Income Statement/Profit & Loss Report
To create an Income Statement or a Profit & Loss (P&L) statement/report got to Reports > Company & Financial > Profit & Loss Standard. Mentioned below is the screenshot of an Income Statement or a Profit & Loss (P&L) statement/report
If you use an accounting system like QuickBooks web hosting , you can very easily generate an income statement. There is no need for you to enter revenue and gains or expenses and losses related amounts while preparing the income statement. According to QuickBooks cloud services setup and design, the accounts get affected automatically, whenever you make entries to track real life business activities.
An income statement acts as a reflection of the past activities of the company and is a required statement for financial reporting (along with the Balance Sheet and Cash Flow Statement). It is important to track and review your income and expenses so you can plan ahead for future growth.
- Julia is Techarex Network’s Content Marketing Associate for Intuit products. She has worked as a B2B and Marketing Strategist for the last seven years, helping businesses with software implementation for Customer Service, CRM, and Email Marketing. Julia thrives in helping companies find the right software solution for their projects. Aside from his obvious passion for Marketing, Julia admits to being a foodie and travel enthusiast.
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