Profit & Loss statement to improve your business performance

Growth always comes with a price, for which an efficient comparison of current year performance and profitability with those of the past year is required to keep you on track

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How to prepare a

Retail P&L statement with Gofrugal?

Creating a P&L statement is as easy as generating invoices for your customers based on their purchases. Using the integrated accounting application, "AccountsEasy," you can avoid multi-step, time-consuming operations and understand your business better. Steps to create Retail P&L statement,

STEP 1: Go to the integrated accounting application "AccountsEasy," navigate the "Reports" menu, and select "Financial statements" and "Trading Profit or Loss" reports.

STEP 2: You can now see the profit and loss statement for the selected period. The transaction that happened in the ERP will be automatically updated.

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Why is Gofrugal ERP the best for generating Profit and Loss statement?

Gofrugal's integrated accounting software helps businesses automate their GST and accounting calculations, which in turn generates impactful business statements such as an income statement, balance sheet, and cash flow statement without the need for individual workforce to generate these statements yet eliminating manual error and providing accurate data. This makes Gofrugal to be used by major businesses to manage their business end to end, from purchase to final accounts and be the best for profit and loss statement generation.

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What is a

Retail P&L statement?

The Profit and Loss statement, or P&L, is a financial statement that helps in determining the financial stability of the business with the help of revenue earned and expenditures made over a period of time. It helps you make a decision whether to increase revenue, decrease costs or do both based on the net summary of the statement.

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Why is the

Profit and Loss statement important?

The major purpose of the profit and loss statement is to analyze a company's income and expenditure over a financial year or any specified period. A P&L statement shows a company's ability to generate sales, manage expenses, and create profits. Also, it is considered one of the major financial statements required by a business.

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Why do retail stores need a

Profit and Loss statement?

For any business, making profits is the ultimate goal, and that's what makes them stay in the business. A profit and loss statement should be prepared in order to figure out whether a company can survive in a competitive environment and to forecast the future.

  • Retail P&L statement gives a clear analysis of what the company is actually generating, considering the revenues/expenses and adjusting it with the indirect overheads
  • Helps in managing a better cash flow and gives visibility for future expansion plans
  • Spots where your cash gets locked and assists in making decisions on shrinking or increasing the resources like employees, inventory or facilities
  • P&L statement helps to compare the performance with the previous years and identify the focus factors to grow business faster
  • Retailers need to be prepared with their latest profit and loss statements, whenever they need to approach a bank or financial institution for a loan or overdraft, or other credit facilities
  • Banks/Financial institutions seek historical, provisional, and projected profit and loss statements from their applicants to review their existing track record of liabilities, repayments trend, and sufficient coverage for their interest debt service
  • Businesses mandatorily need to prepare profit and loss statement to abide by the Income tax and GST laws as well as to understand their business better
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Components of Retail

Profit and Loss statement

A profit and loss statement consists of several components which affect the business, and each component includes varying amounts depending on the type of transaction.

Net sales

Net sales/Revenue is the total value of money that the company generates by selling its products, and services adjusting from the returned goods value.
Net sales = Total revenue generated - Return goods value

Cost of Goods Sold
Gross Profit/Loss
Direct Expenses
Indirect Expenses
Net Profit/Loss

Net profit is the actual profit or loss that a business has made over a financial period adjusting the indirect expenses and indirect income from the gross profit. This actually helps in easier identification of whether the business can generate returns from the investment made and detect where the business lags in generating profits.

Profit and Loss statement format

The profit and loss statement is categorized into two different formats. Depending on the need and mode of analysis, each business chooses its preferred mode of format.

Vertical format

Profit and loss statement format

The vertical format is simple to arrive at using trial balance. In this format of Retail P&L statement, the analysis flows from top to bottom, by aggregating the income and expenditure ledger balances from the trial balance to find the net profit/loss for the specified period.

All companies should necessarily use the vertical format as per Schedule III of the Companies Act, 2013.

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Retail P&L statement format

Horizontal format

In horizontal format, Retail P&L statement considers the distinction between direct and indirect income and expense for a period in which the analysis flows horizontally from left to right, with expense ledgers on the left and income ledgers on the right. Usually, for horizontal P&L format, "T-shaped structure" is followed. The first/upper section of the P&L horizontal format represents trading account transactions, while the second/bottom section represents the indirect transactions for the period. Traditionally, non-companies prefer this format for their P&L analysis.

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What is the difference between the

Profit and Loss statement and the Balance sheet?

The balance sheet and P&L statement are the financial statements that serve the different purposes of the business. A balance sheet gives data on the status of the business in terms of assets and liabilities on any given date. A balance sheet provides the current state of the business, whereas the profit and loss statement infers exact details of expenses and income earned over a period, and a profit and loss statement assists in comparing the P&L statement for two different periods and understanding the growth curve.

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How to prepare Retail store P&L format in excel?

Preparing a profit and loss statement needs basic skills in Excel to simplify the calculation and get accurate results. The steps that are to be followed to prepare a Retail P&L statement in Excel are as follows:

  • Step 1 : Prepare the trail balance, considering all the ledgers. In a trial balance, the total of debits and credits should be matched, ensuring the accuracy of ledger posting.
  • Step 2 : Prepare the trading account by adding the opening stock, purchases, and direct expenses on the debit side and the sales, direct income, and closing stock on the credit side.
  • Step 3 : Identify the gross profit or loss by finding the difference between the trading credit and debit totals. If the trading credit is more than the debit, then the resultant value will be gross profit. Similarly, if the trading credit is less than the debit, then it will result in a gross loss.
  • Step 4 : Bring down the gross profit or loss to the respective credit or debit side of the profit & loss account and adjust the indirect income on the profit & loss account credit side and the indirect expense on the profit & loss account debit side.
  • Step 5 : Now identify the net profit or loss by finding the difference in the profit & loss account credit and debit totals. If the profit & loss account credit is greater than the debit, then the resultant value will be net profit. Similarly, if the profit & loss account credit is less than the debit, then it will result in a net loss.
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Examples of

Profit and Loss statements

Example of Profit & loss (P&L) statement

In this profit and loss statement example, we can see it is divided into 2 sections: The Trading account in the first half and the P&L account in the second half. The trading account starts with the opening stock entry on the debit side. After which, the net purchase and other freight charges incurred in the procurement of raw materials are adjusted. Similarly, on the credit side, the net sales are adjusted for the closing stock value. Now, by comparing the credit and debit sides, the gross profit or loss can be found.

After which, the gross profit/loss can be brought down to the P&L account. If the trading account ends with gross profit, it will be brought down to the credit side. Similarly, if its gross loss, it will be brought down to the debit side. After which, the indirect incomes and expenditures are adjusted respectively on the debit and credit side. Then the net profit/loss arrives similar to how we found the gross profit/loss.

P&L statement

Benefits of the Retail Income statement

There are a variety of financial statements that cater to different needs of the business. The retail income statement, also known as Retail P&L statement, is a financial statement that flourishes the below benefits for the business

A profit and loss statement is the direct evaluation of the profitability of the business and comparison with its past performance

Helps businesses to track whether they are progressing on the right path, making the expected profit from the business

It can also form the basis for future profit and loss statements to estimate projected profits for the business and make better business decisions

A low operating cost might be indicated by a negative net profit despite a favorable gross margin, which can guide management in making decisions to reduce that cost

Helps to make a decision as to where to reduce expense, where the gets blocked and how to increase the net profit

Helps in determining the ability to generate revenue for a longer term

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P&L statement at a glance!

Retail P&L statement
  • Group-wise summary and ledger-wise detailed formats can be generated.
  • Generation of both Horizontal format and Vertical format profit & loss statements can be made.
  • Consolidated location reports, as well as location-by-location reports, are also available.
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