Ever heard of the term "profit and loss statement"?
I'm guessing you already have once or twice but since you did not care
too much, you probably shrugged it off. Well that's what I am going to
explain to you in this post.
In
business math, you'd have to master all the basics so you could
survive. If you survived elementary and high school math then you're
safe my friend. All you need to do is listen
to your professor CAREFULLY.
So first things, first, what's a profit and loss statement?
"The profit and loss statement is a summary of the financial performance of a business over time (monthly, quarterly or annually is most common). It reflects the past performance of the business and is the report most often used by small business owners to track how their business is performing.- http://www.smallbusiness.wa.gov.au/understanding-profit-loss-statements/"
In
other words, this is done to know if you're business is booming or not,
you use this to know how much money you made in your business. You may
do
this every month, so let's get started!
Anybody who starts a business wants one thing: PROFIT.
It is the amount of your sales that's greater than the cost of your
goods and operating expenses. It is your GAIN or your so called MARGIN.
To
know how much you gained throughout your hardwork, first you need to
know how much you bought the materials for your products. This may
include your fare and food expenses when you bought them. In other
words, your INVESTMENT and we will call this amount, the COST OF GOODS.
Now once you've sold loads of your goods, you now have what you
call your GROSS SALES. Don't get too excited it's simply how much money you received for selling the goods, it's not your profit yet!
1. To get your profit, first, you have to deduct all refunds from your gross sales so you could get your NET SALES.
GROSS SALES - REFUNDS and ALLOWANCES = NET SALES
2. then you deduct your cost of goods sold from your net sales to know GROSS PROFIT. Don't get cocky it's not your whole profit yet! We still have ne more step!
3.
From your gross
profit, you have to deduct all your operating expenses which includes
your bills, rental fees, wages and other cost doing business.
which now makes the formula:
GROSS SALES
-SALES RETURN and ALLOWANCES
NET SALES
- COST OF GOODS
GROSS PROFIT
- OPERATING EXPENSES
NET PROFIT
NOW THERE GOES YOUR NET PROFIT! I HOPE YOUR HAPPY WITH THE RESULTS!
Now you can make your simple profit and loss statement like this:
Gross Sales P896, 954.00
less: refunds P25, 520.49
a. Net Sales P871, 433.51
less: cost of goods P577, 320.40
b. Gross Profit P294, 113.11
less: operating expenses
salaries & wages P20,185.98
rent P9,000.00
light and water bills P10,000.00
miscellaneous P10,100.00
Total Operating Expenses P49, 285.98
c. Net Profit P244, 827.13
Profit and loss statements may look complicated to big companies but to simple entrepreneurs, this is the basics of it!
Enjoy!
Checked by Prof. Crisencio Paner
Checked by Prof. Crisencio Paner
Wow kim I never thought business was that complicated.. I mean you need to memorize all those terms :o Nice post!
ReplyDeleteThe terms and examples are useful! Good Job! :D
ReplyDeleteit's so easy to understand. thanks!
ReplyDeletethis could really be useful thanks for this topic break down
ReplyDeleteStay tune! I'll be posting more soon.
ReplyDeleteyou've really explained it very well! made it easier for me to understand. thanks!:)
ReplyDelete