Understanding a Profit and Loss Statement - CONNECT ALL @ the Jacobs Center
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Understanding a Profit and Loss Statement

On Oct. 22, Danea Ramos, Director of the Business Resource Center, held virtual office hours for entrepreneurs to learn the basics of a profit and loss (P&L) statement. She was able to help four entrepreneurs understand what a profit and loss is, what it means to do a health check and the benefits of a P&L when it comes to tax season.

 

Four main things to know about a profit & loss sheet: 

1) Track your income/sales weekly

2) If you have a product, make sure you keep track of your Cost of Goods Sold.

Cost of Goods Sold (COGS) is any cost of materials and labor to make the product.  
Ex: If you sell sunscreen your cost of goods sold would be the ingredients you use to make the sunscreen, the container and stickers.

3) Your Gross profit is based on your sales minus the Cost of Goods Sold. The formula is: Total Sales – Cost of Goods Sold = Gross Profit 

4) Net profit is Gross profit minus operating expenses which include salary, rent, utilities, etc. anything that makes your business stay afloat. The formula is: Gross Profit – Operating Expenses = Net profit 

Knowing what you make can help you keep your business in business!

 

If you would like a free P&L template and to meet one-on-one with CAJC staff, sign-up fill out a business needs assessment.