Welcome to the Fit Small Business Xero training course. In this lesson, we're
going to cover how to create an income statement, also known as a profit and
loss statement, in Xero. To follow along with me,
login to your Xero account now, or click the link below this video for a free
30-day trial of Xero. You can also click this link to access our full Xero course
and other helpful resources. Let's get started.
Income statements show you the revenue, expenses, and net profit or loss of your
business for a period of time. This report helps you understand your
profitability, including insight into what areas of your business are
generating revenue, and where you are spending your money. Based on the results
of this report you can determine the following: areas of your business where
you need to generate more sales, expenses that can be reduced or eliminated
altogether, and trends and profitability - for example certain times during the
year where you are more profitable than others. Your income statement will only
be as accurate as the information that you have entered into Xero. Therefore,
you must stay on top of entering all invoices, bills, credit notes and banking
transactions into Xero. Click the links below to access each of these lessons.
By staying on top of entering day-to-day business transactions, you will have
accurate and reliable income statements that you can review at least on a
monthly basis. Reviewing your income statement on a monthly basis has the
following advantages: you'll be able to identify revenue or expenses that have
been categorized to the wrong account, you'll be able to catch missing income
and expenses which could over or under state what is reported on your tax
return, and you'll be able to take proactive steps to increase your profit.
To create an income statement in Xero from the Xero dashboard, you want to go
ahead and click on reports, and then select all reports.
The income statement report is going to be located in the financial section here.
Please note that there are actually two income statements listed here. Xero has
redesigned several reports, and the income statement is one of those reports.
For the purposes of this lesson, we will discuss the new income statement report
which is indicated with the new button here to the right. Please also note that
you can actually add a report to your favorites by clicking on the star to the
left of the name of the report. So if we click on the star to the left here of
income statement, and we go back up to our reports menu, instead of going to all
reports we can easily access our report right here on the menu tab here.
So that's just a quick way to get to your reports when you need to. So let's go
ahead and launch that new income statement report. And in this screen we
can select our time period that we'd like to run the report for. So in the
date range field here, we can select a preset date range from the drop down,
or you can actually select custom and then select your date range that you'd like to
use here in this section. Once you've made your date selection go ahead and
click the update button to refresh the report. So here is our sample income
statement for our fictitious company Acme Web Pros Plus. The income statement
can be exported to a PDF, Excel, or Google sheets. Just scroll down to the bottom of
the report, click the export button and make your selection from there. You can
also save the report as a draft, published, or custom report. The draft
option allows you to create a report that you or someone else can make
changes to later on. You might create several draft reports before you are
ready to publish them. The published option is used to save
when you are finalizing the books for the month or the year. A published report
will not change if for some reason the information in the system has changed or
updated in some way. Tou can only publish reports if you have the advisor user role.
You can click this link to learn more about user roles. The custom option
is used to save a report format so that you don't have to recreate it each time
you run the report. Xero will ask you if you would like to make the custom
template as your default. And if you'd like to do that then you'll be able to
save that report as your default going forward. We'll show you how to save a
custom report format in the next section. You can easily modify report settings in
Xero in one of three ways: you can change the report title, you can change the
report settings, and you can change the layout and format of the report.
So changing a report title: you can change the title of most reports in Xero. To do
this, just hover your mouse right over the report title as I'm doing here and
to the far right you'll see a link that says edit title. If you click that link you
can actually make the change to the report easily here. So we will change the
name of this report from income statement to profit and loss statement.
Each report in Xero allows you to also change a few report settings. And so to
do that you can click the report settings link for each report it will be
located in the same place directly to the right of the date range field. So if
we click on that, for the income statement, we are able to actually change
the comparison - how many periods we want to compare the report to, the accounting
basis, the numbers, and also the region or tracking categories. So let's talk about
each of these. The comparison here allows you to select previous periods that
you would like to compare the current period that you're running to. So for
example, our current period that we're running this report for is for the
financial year January 1 to December 31st 2017. So if we selected the previous
period of 1, then we would have a column comparing this year's report to last
year 2016. And so we'll show you how that works in a second. Accounting basis:
in general most businesses use the cash method of accounting.
However the beauty of using Xero is that you can run your report using either
accounting method. Just make your selection here. So the default for all
reports will be accrual, but you can easily switch it over to the cash method.
Numbers: if you prefer not to have decimals show on your report, you can
remove this check mark here that says show decimals. And then finally region: if
you have setup tracking categories in Xero, then you can filter this report that
will show all tracking categories you have set up. Or you can remove the all
option and just select individual tracking categories that you would like
to track. And last but not least don't forget to click the update button so
that all of your changes will be made on the report. And so here is our report
based on the changes that we have made. As you can see we've got a column now
here for that previous year 2016. The edit layout designer tool allows you to
further customize the look of your report. Some of the customizations you
can do with this tool are: add additional columns for tracking notes or totals,
change account groupings, edit formulas, rearrange columns by clicking and
dragging. To show you how this works, let's dive in and create a report for
our fictitious company Acme Web Pros Plus. Acme would like to create a custom
income statement that will show the previous month so that they can spot
trends and possible red flags. Acme would like to save the report
as a custom report and make it their default report. This will allow them to
quickly run the report without having to recreate it each time. So let's create
the custom income statement for the month of June for Acme Web Pros Plus.
So we'll go back up to the top and we will select a date range here. So we want to
run this for the month of June. And so we've got that set up we'll click the
update button. And then let's go ahead and take a peek at our report settings.
So for the comparison, this report is going to be run for the month of June.
However Acme would like to be able to see a side-by-side comparison of each
month going all the way back to the beginning of the year January. So by
selecting a 5 here, the report will show it's not only the month of June but it
will go all the way back to January and show the comparison for each month.
And we'll go ahead and switch the accounting basis to cash, and then let's go ahead
and update the report. And so as you can see here is our updated report. We've got
our current month that we wanted to run the report for, June, here. And then next
to it we've got each of the five months that we'd like to compare it to going
back to January. So while this report does look great, if you are concerned
about each month individually, we should also be able to see what the total
income, expenses, and net income are for all six months combined. Now this is
where the edit layout designer tool comes in handy. So at the very bottom of
the report you want to click on the edit layout button here. And here is our edit
layout designer. So at the very top, this section is the edit layout designer
toolbar. So in this section we have the ability to customize our text,
we have the ability to create a schedule within the report,
we can add a footer to the report, we can add a row, or we can add a column.
So we're going to go ahead for this example and add a column to the report. Now as we
make changes to the report, we'll be able to see the impact of those changes in
real time in this section of the template here. And then over to the right
you'll see how that works when we get ready to create our formula for our
total column. So to go ahead and add a column, we'll click the columns icon here.
And this particular column since it is going to be a total, we need to create a formula.
So we'll go ahead and select formula. And now that opens up this
section where we need to actually create our formula. So first of all we'll click
the insert button. And so here we want to let Xero know which columns need to be
totaled up for our new columns. So we'll start with the January column. And since
we want a total we'll click the plus sign, and then we'll go back and
basically you want to select each column that needs to be included in the formula
that you are creating. And then below that we've got a field that says name so
this is just basically what do we want the title of that column to be. And so
we'll just simply call it total. And once you are satisfied with your changes you
can click this blue button that says done. Here is our updated income
statement report for Acme with our new total column. So now as you can see we've
got total income that we can see now and we've also got total expenses here,
and our net loss here totaled up for all six months. So that wraps up the lesson on
how to create an income statement in Xero.
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