A profit and loss statement template is a very crucial financial tool which can be illustrated as an affirmation cursory of all the revenues and expenses of business, during a defined period. Essentially, these statements usually practiced in business while they are all set to reflect their financial health of the organization over a desire time frame. Nonetheless, these time period can be a particular month, quarter, year or more than one year. There is no doubt, every profit and loss statement also noted as an income statement, which serves the same purpose and objectives. It provides a financial assistance which has accession to demonstrates the business milestones, comparatively; profit managers, loses, investments, information of investors for certain projects, exact financial state of business, information of those companies and parties who are interested to invest in ongoing or new projects of business likewise.
Significance of Profit and Loss Statement
As I have mentioned above, this statement which formally prepared and used by corporate sector, has approach to canvas any phase of business life. Take another look, you wish to formulate a profit and loss statement for your business, before compiling the data, you need to decide time frame, accuracy of account ledgers, proof of accounts and contingency transactions. Because these factors are critical and can reflect material effect on the overall look of financial health. After it, you can add a total segregation of all accounts that can reflect profit and loss. Meanwhile, these accounts can further study for all the features which you need to conclude proportionately and makes changes. This format provides yet another privilege of accessing the actual profit and loss of the products that you have in your portfolio one by one.
Details of Profit and Loss Statement
Normally, these statements frequently issued by companies at the end of every quarter, half or full fiscal year. Thus, the pivotal objective of profit loss statement (PLs) is to provide detailed information regarding the revenues and expenses of a business, although a standard income statement will always issue for a certain span of time. In addition, a potential investor will also use to review these documents because they are the one who then engages to measure the financial health of the investment. While preparing your own statement, all you need is to add desire data, make necessary changes either in content or data and can straightly go for review. Perhaps, you can give unique name of all categories as per your prerequisites. You can also put a hold on the record of your accounts before applying simple bookkeeping terms or applying amendments correspondingly as per your financial needs.
Pros and Cons of Profit and Loss Statement
This statement is a very handy tool not only for reviewing but also for making investment related decisions. Investment managers and agents always prefer to look deep in any profit and loss statement before bidding. There are advantages and disadvantages of showing profit and loss statement, which are given below;
Some Common Pros
1- It helps a business tracking their profit and loss stats of determined time period.
2- Good businesses are those who are earning profits, and this can reflect in your profit and loss statement. Therefore, this should be broadcast to attract new investors.
3- A profit and loss statement can reflect your financial strength and this is very crucial to win public trust.
4- It gives you a chance to show progress over period of time, especially when you are earing more profit than previous.
5- This statement provides opportunities to those who can analyze it and can make projections.
Usual Cons
1- It can demonstrate your real financial position which can cause trouble in stakeholders.
2- Management has control over data and can arrange or rearrange as per their desire.
3- People have trust issue because not all statements come with accurate data, things can be manipulated easily.
4- A statement of profit and loss, is never a complete picture of financial health of any organization.
