The profit and loss or income statement is divided into two sections: income or revenue, and expenses or costs.
In this video…
In this video you’ll learn more about your income or profit and loss statement, including what appears in each section, and how you can use the informaton in each section of a profit and loss statement to make business decisions or see where you are on a job, financially.
What Appears on a Profit and Loss Statement?
A basic income statement is divided into sections.
The first section is income, also known as revenue. When you bill or invoice your jobs, you generally record that amount to the income account.
The next section on a profit and loss statement is direct expenses. This section is used for costs directly charged to jobs. You should be able to run job cost reports for a given period of time and get the balance using the direct expense section of your income statement.
The last section on your income statement is overhead expenses. Certain expenses are required to operate your business. They may be fixed, the same amount each month, like rent for your office, or they may be variable, like the electric bill for your office. Telephone/internet service and office supplies are other examples of overhead expenses. These are real costs that need to be calculated and covered in your bids.
Your profit and loss statement can tell you a lot about your business, but it always helps to have an expert look at it too. It’s a good idea to periodically review your income statement with your CPA for tax planning and business advice.
In the next video we’ll talk about work in process, also known as your WIP report.
Next Video: Work In Process