Hi, everyone. I'm Astrid Daniella Galvez Quickbooks has invited me
to be part of this video series to share tips and best practices
on how to run your small business. Show of hands.
Who here likes the sound of flowing income?
You're not alone.
But you know that to truly understand how much you're netting in, first,
you're going to need to understand revenue, expenses, profits and more.
This is where the net income comes in.
If you'd like to read about it, check out the link in the description below.
But before we get to the bottom line, don't forget to hit the like button
and subscribe to the Quickbooks YouTube channel.
Business owners can't hide from the income statement
or profit and loss statement, as it's sometimes called.
It does precisely what it says, showing how much profit a business is making
by subtracting the total expenses
from the total revenue to find the net income.
The income statement
is a view on how well your business is doing over a period of time.
You can improve your business's
bottom line by reviewing each line item in the report.
For owners and managers.
It's an indicator of how well things are going
and whether or not action needs to be taken.
Sometimes business owners
get confused between the income statement and the balance sheet.
The balance sheet is a snapshot
of a business's financial position on a particular day.
It's a static representation of the businesses, assets and liabilities.
Basically what the business is worth.
On the other hand, the income statement is taken over a period of time.
So it's more dynamic.
It shows how much profit or loss of business makes.
And it often indicates if a business is growing or not.
An income statement can also help you determine whether or not
the business is pricing their product correctly.
There are two forms of income statements
commonly used by small and mid-sized businesses.
The single step income statement and the multi-step income statement,
a single step income statement is the simplest and easiest to prepare.
To prepare one, it's a matter of calculating the total revenue
and subtracting that from the total expenses in order to find the net income.
The multi-step income statement is a little bit more complex,
but it gives a more detailed view of the financial performance of your business.
Every set of company
financial statements should include a multistep income statement.
The big difference is that revenue and expenses are broken
down into operating and nonoperating categories.
By using the multi-step income statement, a company can calculate the gross profit
by subtracting the cost of goods sold from the net sales.
The operating income is calculated by subtracting
the current operating expenses from the gross profit,
and then the net income is calculated by adding or subtracting
any other revenue and expenses from the operating income.
For growing businesses, the extra detail in the multi-step income statement
will give lenders a clearer picture of how your business is doing.
There are more complex ways of showing the income statement,
but these two are the most widely accepted for small and mid-sized businesses.
If you're ready to get started with your income statement,
the guide linked below features a free income statement
template that you can download.
Quickbooks tracks and organizes all of your accounting data
so that you can easily access your income statement
and spend less time doing manual data entry.
You can also connect with a Quickbooks live Bookkeeper
so that you can take the daily bookkeeping tasks off your plate.
Make sure to subscribe to the Quickbooks YouTube
channel to find more videos on how to run your business.
And don't forget to hit that like button if you found this video useful.
See on the next one.