Growth always comes with a price, for which an efficient comparison of current year performance, profit and loss (P&L) statement with those of the past year is required to keep you on track.
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Creating a retail P&L statement is as easy as generating invoices for your customers based on their purchases. Using the integrated accounting application, "AccountsEasy," you can avoid multi-step, time-consuming operations and understand your business better. Steps to create Retail P&L statement,
STEP 1: Go to the integrated accounting application "AccountsEasy," navigate to the "Reports" menu, and select "Financial statements" and "Trading Profit or Loss" reports.
STEP 2: You can now see the profit and loss statement for the selected period. There are 2 P&L statement format available in Gofrugal. Depending on the requirement, the P and L format can be chosen. The transaction that takes place in the ERP will be automatically updated in the P&L statement
Gofrugal's integrated accounting software helps businesses automate their GST and accounting calculations, which in turn generates impactful business statements such as an income statement, balance sheet, cash flow statement, and P&L statement without the need for individual workforce to generate these statements yet eliminating manual error and providing accurate data. This makes Gofrugal to be used by major businesses to manage their business end to end, from purchase to final accounts and be the best for profit and loss (PnL) statement generation.
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The Profit and Loss statement, or P&L, is a financial statement that helps in determining the financial stability of the business with the help of revenue earned and expenditures made over a period of time. It helps you make a decision whether to increase revenue, decrease costs or do both based on the net summary of the statement. The P and L statement format is derived in such a way that it clearly describes where the revenue is earned, and expenditures are incurred, hence it is most suitable for retail businesses.
Know more about P&L statement format
The major purpose of the profit and loss statement is to analyze a company's income and expenditure over a financial year or any specified period. A P&L account format shows a company's ability to generate sales, manage expenses, and create profits. Also, it is considered one of the major financial statements required by a business.
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For any business, making profits is the ultimate goal, and that's what makes them stay in the business. A profit and loss statement should be prepared in order to figure out whether a company can survive in a competitive environment and to forecast the future.
A statement of P&L format comprises several components which affect the business, and each component includes varying amounts depending on the type of transaction.
The P & L account format is categorized into two different versions. Depending on the need and mode of analysis, each business chooses its preferred format of PL Statement.
The vertical P and L format is simple to arrive at using trial balance. In this format of Retail P&L statement, the analysis flows from top to bottom, by aggregating the income and expenditure ledger balances from the trial balance to find the net profit/loss for the specified period.
All companies should necessarily use the vertical format as per Schedule III of the Companies Act, 2013.
In horizontal P and L format, Retail P&L statement considers the distinction between direct and indirect income and expense for a period in which the analysis flows horizontally from left to right, with expense ledgers on the left and income ledgers on the right. Usually, for horizontal P&L format, "T-shaped structure" is followed. The first/upper section of the P&L horizontal format represents trading account transactions, while the second/bottom section represents the indirect transactions for the period. Traditionally, non-companies prefer this format for their P&L analysis.
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The balance sheet and P&L statement are the financial statements that serve the different purposes of the business. A balance sheet gives data on the status of the business in terms of assets and liabilities on any given date. A balance sheet provides the current state of the business, whereas the profit and loss statement infers exact details of expenses and income earned over a period, and a profit and loss statement assists in comparing the P&L statement for two different periods and understanding the growth curve.
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Preparing a profit and loss statement needs basic skills in excel to simplify the calculation and get accurate results. The steps that are to be followed to prepare a Retail P&L format in Excel are as follows:
In this profit and loss statement example, we can see it is divided into 2 sections: The Trading account in the first half and the P&L account in the second half. The trading account starts with the opening stock entry on the debit side. After which, the net purchase and other freight charges incurred in the procurement of raw materials are adjusted. Similarly, on the credit side, the net sales are adjusted for the closing stock value. Now, by comparing the credit and debit sides, the gross profit or loss can be found.
After which, the gross profit/loss can be brought down to the P&L account. If the trading account ends with gross profit, it will be brought down to the credit side. Similarly, if its gross loss, it will be brought down to the debit side. After which, the indirect incomes and expenditures are adjusted respectively on the debit and credit side. Then the net profit/loss arrives similar to how we found the gross profit/loss.
There are a variety of financial statements that cater for different needs of the business. The retail income statement, also known as Retail P&L statement, is a financial statement that flourishes the below benefits for the business
A profit and loss statement (P&L) format is the direct evaluation of the profitability of the business and comparison with its past performance
Helps businesses to track whether they are progressing on the right path, making the expected profit from the business
It can also form the basis for future profit and loss statements to estimate projected profits for the business and make better business decisions
A low operating cost might be indicated by a negative net profit despite a favorable gross margin, which can guide management in making decisions to reduce that cost
Helps to make a decision as to where to reduce expense, where the gets blocked and how to increase the net profit
Helps in determining the ability to generate revenue for a longer term
