When you open a small business, seeing your idea become a reality can be exciting. However, as your business grows, it will be essential to consider how you will record and use financial information. One important tool that can be utilized for this purpose is the profit and loss statement. Here is more on understanding Florida profit and loss statements.
What is a Profit and Loss Statement?
A Florida profit and loss statement, or P&L, is a document used to record a business’s financial activity during a certain period. This activity typically includes costs and sales. P&Ls can be used to record information during any time frame. However, they are mostly used to record this data monthly, quarterly, or annually. Accountants sometimes refer to these statements as earning statements, statements of income, and operations statements.
How is Financial Information Recorded?
P&L statements tend to be fairly straightforward. They include an entity’s sales, expenses, and profits. Business profits are typically reported as net profit or income minus overhead and taxes.
How Can My Business use a P&L?
Business owners can use P&Ls to examine their performance, determine trends, and decide if changes need to be made. One of the main things a P&L does is help businesses learn whether they are profitable. The P&L is also used along with other documents by the Internal Revenue Service (IRS) to assess business tax liability.
What is Included in a P&L?
Revenue—Your business revenue reflects the funds that your business receives. Business revenue is typically generated through the sale of goods or services. However, some businesses have revenue streams that come from investments and other financial resources.
Expenses—Business expenses generally refer to the costs associated with operating your entity. These may also include costs such as those paid for rent, salaries, payroll services, advertising, and administrative fees.
Losses—Your losses refer to spending more than you take in. Your P&L should reflect when your enterprise experiences a net loss. When this occurs, this data can help you learn more about why the loss occurred.
Businesses usually also use balance sheet reports to record their financial information. Balance sheets report a company’s assets and liabilities and shareholder equity information. The balance sheet is another way to examine a business’s resources, assets, and obligations. The report also reflects investment data.
P&L statements can be essential to assessing a business and determining its performance. However, several other areas are equally important to an entity’s success. The best way to plan for and protect your enterprise is by working with an experienced Florida business attorney. Your business lawyer can help you understand P&L sheets, balance sheets, and other important tools you need to support your business’s future.
Contact an Experienced Florida Business Attorney
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent small business clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.