Set up a profit and loss statement

A profit and loss (or income) statement lists your sales and expenses. It tells you how much profit you're making, or how much you’re losing. You usually complete a profit and loss statement every month, quarter or year.

Use your profit and loss statement to help develop sales targets and an appropriate price for your goods or services.

For each year, you need to fill in actual or forecasted figures against each of the below items. If you use estimated costs, you need to label them clearly.

You also need to clearly state on your profit and loss statement whether your figures are GST inclusive or exclusive.

Sales

A sale is a transaction between 2 or more parties. The buyer receives tangible or intangible goods, services or assets in exchange for money. You can forecast sales by looking at previous years, identifying seasonal trends and analysing the market. This includes total sales, cost of goods sold and gross profit.

Expenses

An expense is the cost of operations that a company incurs to generate revenue. You can anticipate cash outgoing by looking at previous years, identifying seasonal trends and accounting for your major expenses. This includes:

• accountant fees
• advertising and marketing
• rent and rates
• utilities (electricity, gas, water)
• insurance.

Total expenses

Calculate total expenses by adding all expenses.

Net profit

Net profit is the money left over after you paid expenses. Calculate net profit by subtracting expenses from sales.