Small Business Information Center. Com

Financial Information for Your Small Business 

Basic Financial Information: Profit and Loss Statement 

Financial information is the driving force behind every decision made for your business.  The financial information that is most fundamental to the daily operations of your enterprise is the Income Statement or what is commonly referred to as the Profit and Loss Statement. The income statement is a report card of the profitability of your business which you will prepare each month and every year. This financial information can quickly tell you how well your business is doing.  The income and expenditures which you have recorded on a daily basis are now entered into these financial statements to provide monthly and yearly financial information.  The calculation is very simple: 

                           Money In ( taken from your income ledger )

            Minus     Money Out ( taken from your expenditure ledger )

            Equals    Profit ( negative number is a loss.)

In practice, this financial information is usually much more complicated to derive, especially if you have expenses such as products or materials inventory.  When you prepare monthly statements, you should usually also calculate the profit and loss for the year-to-date.  With monthly and year-to-date figures, your financial information should provide a pretty good idea of how your business is progressing, and whether it is profitable or not. The income statement or profit and loss statement can be considered to be similar to a motion picture of the business operations during the period covered by the report; this financial information provides careful analysis of and reveals what has happened, and will indicate why the businesses now is where it is. This financial information will then provide data for the balance sheet which is the statement that shows exactly where the business stands; it can be thought of as a snapshot of the business as it stood on the last day of the accounting period.  The balance sheet shows for the business shows where it is; the profit and loss statement shows how it got there.  Used wisely, these two statements will give a good indication of what may be expected in the future. 

Financial Information: A slightly more Complex Profit and Loss Statement 

Financial information provided by the profit and loss statement, summarizes the business transactions as follows: 

Gross Sales                                                   $210,000

Less: Sales Returns and Allowances                 10,000 

Net Sales                                                       $200,000

Less: Cost of Goods Sold                                 140,000 

Gross Margin                                                  $ 60,000

Less: Expenses (itemized)                                 40,000

Net profit                                                         $ 20,000 

This financial information makes readily available all of these amounts except for the cost of goods sold, which is easily computed from inventory records as follows: 

Inventory, beginning of period                            $ 44,000

Plus: Purchasers of goods during period             132,000 

Goods available for sale during period               $176,000

Less: Inventory on hand, end of period                 36,000

Cost of goods sold                                          $140,000 

This financial information is then provided for the Balance Sheet.                                                       

Some information provided by  Start Your Own Business for $1,000 or Less

Web page by Paul Susic M.A. Licensed Psychologist Ph.D. Candidate  CEO/President Susic Psychological Consulting P.C.