resulting profit or loss, over a specific time period (a month, a quarter, or a year). You then add in any other income (for example, from machinery sales, rent from tenants in your office space etc) to give you your profit before tax. The terms can be used interchangeably on your profit and loss statement (just to make it a little more confusing!). You can see what generates the most money, and what you might want to focus on in the future. What Do All the Acronyms Mean? The gross margin percentage represents that number as a percentagethe higher the number, the better. Profit and loss account example, sales/Turnover 60,894, opening stock (1st of month) 3,000. Of course, your business will have other expenses, such as overheads, which need to be subtracted from the gross profit. Heres a quick run-down and explanation of what each section means and where the numbers come from. Whatever abstract terms or acronyms you encounter, just remember that the money your business makes, minus the money it spends, will tell you what your profit. Its the financial statement that bankers and investors will flip to first when theyre reviewing your business plan. For example, if you buy a widget for 1 and sell it for 3, your gross margin would. This simple guide probably did funny wedding programs not make for particularly easy reading. One way to present operating expenses in a profit centers P L report is to list them according to the object of expenditure basis. Revenue Direct Costs Gross Margin, gross margin tells you how much money you have leftover to cover your expenses after youve covered the cost of the product or service you are selling. The following figure presents a P L report for a profit center example that classifies operating expenses according to how they behave relative to sales activity. Whether you use accounting software to create your P L account, or you keep your accounts manually on paper or in a spreadsheet, the figures are usually set out in a similar way. If youve followed the above then youre more or less done with the theory of profit and loss statements. Operating expenses: Operating expenses cover all of the expenses that you incur to keep your doors open, excluding your direct costs that we talked about earlier. From this, the P L takes away cost of sales (for example, total unit costs, packaging and delivery giving you your gross profit. Net grand opening party invitation wording profit: Also known as net income or net earnings, is the bottom line that you hear about so much. Gross profit shows how much money youre business has made in total, for the defined period of your profit and loss statement.