Business owners know that paperwork is part and parcel of running your own business. This includes income or profit and loss statements which is one of the documents required when filing income taxes or when crafting a new business plan for a loan application. Read on to know why you need to prepare updated and reliable profit and loss statements if you run your own business.
An income statement starts with a header which contains the name of the statement, company name and the period covered, which could be a month, a quarter or any other period. Some statements may indicate whether cash or accrual accounting was used. The next part is the income revenue for the period covered. This shows any income minus any deduction for returns, discounts and the like.
Next is the list of all expenses during the period covered. These are typically listed in alphabetical order. This is followed by a calculation of the percentage of each expense to the gross income which is useful in showing percentage changes in different statements over time.
Aside from being a required form of documentation for official transactions such as filing of taxes, income statements are useful in other ways, such as when filing a business plan and as a tool for auditing and analysis.
A profit and loss statement is often a required documentation when applying for a business loan, expansion and the like. Your bank may require you to present an income statement to see how profitable the business has been and use this information in making the decision to approve or deny your application.
A profit and loss statement is useful for looking at the performance of the business over time. Internal auditing and analysis will require you to look at your profit and loss statement to see which areas are profitable, which areas are losing money and how you can adjust costs and expenses to meet projected goals.
A profit and loss statement is an important requirement when filing your tax returns. This tax statement covers the entire year and ends at the date of the end of the financial year. As tax season nears you need to start preparing documentation to support the filing of business taxes, military, or payroll taxes. Typically, a profit and loss statement is formatted to match income and expenses in Schedule C which is specifically for the use of small business owners filing their income tax returns.
The preparation of a profit and loss statement is an important part of applying for a business loan or filing your taxes which is why you need to make sure that you can prepare an accurate and reliable record of your business' income and expenses. Working with a professional team can ensure that your records and document are up-to-date, accurate and reliable.
We at www.continentaltaxandaccounting.com focus on providing professional assistance with the tax and accounting issues of various clients, including small business owners. By working with professionals, you are assured that your important financial accounting and tax paperwork are handled the right way. Get in touch with us today.
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