Understanding Business Profit And Loss

For most home business owners and many small business operators, their idea of a profit and loss statement, P&L in business parlance, may be oversimplified. If they had more income than expenses, they made a profit. If not, they had a loss and will usually try to find more business or increase prices to turn the trend around. By better understanding their own businesss profit and loss statement, they will be able to determine not only how much money is earned and spent, but also track their expenses to gain better control of the finances.

The first thing to remember is that there is a difference between a budget and a profit and loss statement. Income is projected and expenses are budgeted, based on the income projection. If the income does not meet the forecast, certain expenses will need to reigned in to make the profit and loss statement come in on the plus side at the end of the month.

The businesss P&L can be as simple or as complex as you choose to make it, but the more tracking of expenses that you do, the better handle you can have on what needs to be done to control your profit amount. For example, you can simple include a line in your expense...