The Profit and Loss statement is arguably the most popular of the financial statements! Most QuickBooks users I have worked with want to know first what does their Profit and Loss look like? This is especially true when I’ve just finished cleaning up their books. The reason is obvious. We want to know whether or not we’re making money. No problem, let’s see what that looks like. In its most complex form the profit and loss can be made up of the following sections:
Sales Returns and Allowances
Cost Of Goods Sold
Purchase returns and allowances
When you are building your chart of accounts in QuickBooks you should always start with one of the standard account sets for your industry. If none of the sample industries exactly match yours, pick the one that fits most closely. You are going to be able to and want to change this as you go. My motto on building your Profit And Loss Statement is “keep it simple.” The great thing about a program like QuickBooks is that it makes it easy to get into the details when you want to so you can keep the macro level reporting simple, and you do that by keeping the chart of accounts simple.
My video on Understanding The Profit and Loss Statement will demonstrate how you build your profit and loss and more specifically your chart of accounts in QuickBooks. You will see an emphasis on setting up your income accounts because you have to set up your “Item List” which is really your list of products and services that you offer. These “Items” all need to be linked to an account in your chart of accounts, especially the income account.
Please post your comments and questions below and don’t forget to sign up for or download the recording for my live webinar on Oct 14, 2011 – “Nerd’s Cash Flow Projections”
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