Business is nothing but a cluster of many different tasks. If you have just entered the business market, you may find a lot many tasks which are cumbersome. One of such tasks, often loathed by many business tycoons too, is finance. No matter how much you hate handling finances, they cannot be taken for granted. Thankfully, there are many firms providing accounting services in West Delhi. They help you with many aspects of finances, like tax, balance sheet, audits and P&L accounts.
A profit and loss account is nothing but a summary of your incomes and expenses over a period. The statement is prepared often for a year. Whether you do your own finances or hire a ca in Janakpuri, it is important to know how to read the statement. This will help you understand the financial condition of your business.
To help you understand better, here are the common parts of a P&L Statement:
1. Cost of Goods sold
This is the direct cost you incur in production of goods.
2. Operating costs
These include overhead expenses that you incur in daily running of your business. These expenses may vary as per the product you deal in. Salaries, marketing costs and rent are some common inclusions.
3. Sales
As the names suggests, this means the revenue received from selling the goods. The goods here mean only the product you are dealing in.
4. Gross profit or gross loss
The amount left after subtracting cost from revenue earned. The gross profit reflects the profitability ratio of the company.
5. Operating profit
The amount left after reducing operating expenses from gross profit. It reflects the profitability of your business after taking into account the daily expenses.
6. Other incomes/expenses
These are extra incomes or costs which are not regular in the daily operations of business. These may include an interest earned, earning from selling an old machinery etc.
7. Net profit before taxes
This is the most important component of P&L statement. It shows the profitability factor of your business after considering all expenses. The amount also includes the tax which will be paid.
8. Taxes
As the name suggests, it is the amount due for the company to pay. To know more about taxes, rebates and returns, you can consult a ca in Janakpuri.
It is vital that you are aware of profitability of your business. It is the first step towards becoming a sound businessman. The P&L statement can help you identify what led you to losses, costs going out of hand and suggest how you can improve.
It is also an essential aspect for banks and other lending institutions. A quick glance at your statement can help the banker decide whether to give you loans in future or not.
Call to action:
www.manishanilgupta.comis an experienced chartered accountancy firm in Janakpuri. The company is also one of the leading firm for NRI Return filing in India.
Source: http://prsync.com/manishanil-gupta/learn-to-read-a-pl-report-3289813/