welcome to the fit small business
quickbooks online training course in
this lesson we're going to cover how to
run a profit and loss statement in
quickbooks online to follow along with
me
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helpful resources let's get started the
profit and loss statement provides a
summary of your revenue minus expenses
for a specific period of time such as a
month a quarter or a year it tells you
your bottom-line net profit or loss you
may have heard the statement referred to
by other names such as P&L income
statement statement of earnings and
statement of operations it's important
to understand if you are making money or
losing money and why I don't know anyone
who is in business to lose money however
if you are losing money then you want to
quickly understand why so that you can
turn things around
I recommend the profit and loss
statement at least on a monthly basis so
you can review revenue and expense
trends and know where you stand from a
profitability standpoint to help
demonstrate the components of the profit
and loss statement we will use a
fictitious company Paul's plumbing below
I have identified four sections of the
profit and loss statement for Paul's
plumbing this profit and loss statement
is for the period January 1st through
September 29 2016 section 1 shows the
revenue earned from the sale of products
and services for this designated time
period
pause plumbing had a total revenue of
six thousand two hundred and fifty nine
dollars section two shows the cost of
producing all the products sold cost of
goods sold and the gross profit which is
the difference between the revenue and
the cost of goods sold
Paul's plumbing had a total cost of
goods sold of one thousand seven hundred
and fifty dollars for the designated
time period total revenue section one
was six thousand two hundred and fifty
nine dollars the difference between
total revenue and cost of goods sold is
the gross profit
of 4509 dollars gross profit represents
the profit before operating expenses are
subtracted typically if you do not carry
an inventory then you will not have cost
of goods sold on your profit and loss
statement section 3 shows the expenses
the business has incurred such as
advertising costs
paul's plumbing had total expenses of two
thousand eight hundred eight dollars and
forty seven cents and finally section
four this section shows the business's
net income sometimes refer to as the
bottom line it is the difference between
the total revenue section one and total
expenses section three paul's Plumbing
has a net income of two thousand two
hundred dollars and fifty three cents if
revenue exceeds expenses then the bottom
line will be a positive number which
means that the business was profitable
for the specified time period that is
the case here for Paul's plumbing and it
is what every business strives for
however if you are in business long
enough you could have a result where
your expenses exceed your revenue which
will result in a negative bottom line or
a net loss at the end of the video I
will provide you with some valuable
action items to help you further analyze
your income and expenses you can run a
profit and loss statement in quickbooks
online in under two minutes
first from the home page click on the
reports option located on the Left menu
bar the profit and loss statement is a
very first report located under the
recommended reports tab from this screen
we have several options to choose from
starting with the print button you have
the ability to print this report you
also have the option to email this
report to anyone that you would like to
review it for example an accountant or a
tax professional the export button
allows you to export this report to
excel where you could make notes and do
further analysis the customize button
allows you to customize a number of
areas of the report including general
information like date range report basis
also it allows you to control how many
columns you can see the one column or
multiple columns for each month it
allows you to change the header or
footer information and also to format
numbers the collapse button you can use
the collapse button if you actually have
sub accounts on the report this button
allows you to hide that level of detail
if you so choose save customizations
allows you to save any custom changes
that you have made to the report so that
you can use them again transaction date
you have the option to select the time
period that you would like to run the
report for you have two ways of doing
this the first feel if you click the
drop-down gives you specified time
periods that quickbooks has set up
already so you can select one of these
or you can actually type in the specific
date that you'd like to run the report
for after you've done that you can just
click the run report button and you've
got the report that you wanted to the
far right you'll notice the basis has
been indicated for the report in our
report it says cash basis so basically
there are two options for basis cash
basis or accrual basis accounting most
of all businesses use cash basis
accounting because it is simpler than
accrual if you're not sure which method
you should use ask your accountant and
click here to read more about these two
accounting methods in our article small
business accounting accrual versus cash
in order to solidify how what you do in
QuickBooks will impact your financial
statements let's walk through a common
business transaction for paul's plumbing
to see how it will impact his profit and
loss statement so Paul has created an
invoice for one of his customers so we
will go ahead and navigate to the
customer center by clicking on customers
on the left hand side we'll go ahead and
scroll down and display this invoice we
just created
the invoice that was created is for
plumbing services the total amount of
the invoice is five hundred dollars so
we're going to go ahead and receive
payment against this invoice and the how
to receive payments lesson we walk
through step by step how did we see
payments and apply them to open invoices
click here to watch this video tutorial
so we'll go ahead and click receive
payment here and we'll just designate
the payment method and then we can save
this transaction now let's take a look
at the impact creating an invoice in
receiving a payment has on Paul's profit
and loss statement there are four counts
that have been impacted by these
transactions total income gross profit
net operating income and net income on
the left-hand side of your screen we've
got the profit and loss statement before
those transactions were created and on
the right hand side we've got the profit
and loss statement after those
transactions were created so starting
with total income total income before
was six thousand two hundred and fifty
nine dollars that has increased by five
hundred dollars to six thousand seven
hundred and fifty nine dollars on the
right gross profit before was four
thousand five hundred nine dollars and
now gross profit is five thousand nine
dollars net operating income was
seventeen hundred dollars and fifty
three cents before and after those
transactions were saved net operating
income is two thousand two hundred
dollars and fifty three cents and
finally net income our bottom line was
two thousand two hundred dollars and
fifty three cents and it has increased
by five hundred dollars to two thousand
seven hundred dollars and fifty three
cents if you are on the accrual basis of
accounting the invoice will show up on
the profit and loss statement after you
create the invoice for those on the cash
basis of account
team you will have to complete both
steps create the invoice and receive the
payment as we just did to see any
changes on your profit and loss
statement for more information on cash
versus accrual ask your accountant you
can also click here to read our article
on small business accounting or cruel
versus cash you should now have a pretty
good understanding of what the P&L
statement is how to run a P&L in
QuickBooks and how important it is to
the overall success of your business
here are a few processes that I
recommend you put into place immediately
be sure all income and expenses are
entered into QuickBooks Online as often
as possible at a minimum you want to do
this each month review your profit and
loss statements on a monthly basis
investigate revenue and expense trends
that you notice while reviewing your
profit and loss statement for example
ask yourself these questions is your
revenue consistently going up or down
each month if so why are there specific
times during the year when revenue drops
or spikes if so what is the reason for
this is this normal similar you want to
do the same thing for expenses are your
expenses consistently going up or down
each month if so why are there certain
times during the year when your expenses
go up or down if so why is that
happening
take action based on your findings be
sure to share your P&L statement with
your accountant and tax professional who
can provide you with more guidance that
wraps up the lesson on how to run a
profit and loss statement in QuickBooks
Online to access our full quickbooks
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