A Profit and Loss Account can clearly shows you whether you made or lost money in a trading period. Accounting is essential for all kinds of business, big or small. Whether you are a café owner or retail shop owner, accurate accounting for your business is important to keep track of the financial health of your business. Your accounts can be very detailed to keep track of the profitability of every product of your business.
A spreadsheet provides an easy platform for you to create your accounting report. Microsoft Excel and Google Docs are two programs that allow you to create spreadsheets but the latter comes free. Below is an example of Profit and Loss Account created using Microsoft Excel:
Depending on your business nature, you can add on more types of sales and expenses. The more detailed your P & L Account is, the better you can keep track of your business. One spread sheet for different categories of monthly sales and another spreadsheet for different categories of monthly expenses. You will create a spreadsheet to consolidate the sales and expenses in order to get the final yearly profit or loss. From the P&L account, you can calculate your profit margin and the increase or decrease of profit from month to month. Thereafter, you can create a chart to portray the trend of your profit.
As your business transactions increase, you will need professional accounting software such as those from Intuit as they can automate the process of creating P&L account. Accounting software like QuickBooks from Intuit is designed for the layman who is not required to have any accounting knowledge. It provides 30 days free trial. For those who have started out using Excel, data can be imported to Intuit’s program.
If you are trying to earn money online, you should always treat it as a serious business. Every business needs a profit and loss account. I am not saying that you should create an accounting report that is meant to be audited but just create one that can at least provides you with a profit figure. For those who handle most of its online transactions using Paypal account, you can easily find out your profit figure as the balance you have in the account is most likely your profit. However, there are quite a number of affiliate programs give commissions in the form of checks and direct bank deposits.
As an online marketer, I believe that you keep track of the traffic to your website. I would like to highlight that it is equally important to keep track of your profit. If you find that you are making losses in a particular month, this raises the alarm for you to control your costs. For instance, you can cut down the cost you spend on Internet Marketing e-books in order to increase your profit for a particular month. It is pointless to have high amount of revenue with sky high costs. By increasing revenue and controlling costs at the same time, you will increase your profit. A profit and loss account provides a basis for you to set a target for your future income. If you are able to achieve your targeted profit figure at a particular month, you can feel the sense of achievement that keep you motivated.
Quite a handful of online entrepreneurs post their Profit and Loss Account on their blog monthly. This helps to motivate newbie bloggers and themselves at the same time. I like to read other bloggers’ Profit and Loss reports as it encourage me to continue earning money online as well as telling me that earning money online is possible.