Profit and Loss in Business and how to Determine it

The main goal for any business is profit and when companies and organizations are set up for no profit, then it is regarded as a non-profit organization and not a business. A lot of business owners are always happy with the fact that they can create or start a business and although this is true as it is not easy to be an entrepreneur. A lot of business ideas never came into existence and also, a lot of businesses didn’t even come to stay, so when these people are able to create or start a business, they deserve some accolade, but starting a business isn’t what a business is about, business is about making profit, growing and in some cases make losses.

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How do you know a business is doing well when the profit and loss isn’t properly reviewed? A business growth and revenue should be based on facts and not just hopes and believes. Checking how profitable a business is always helping the business grow and allows entrepreneurs know the status of their businesses.

In other to properly determine the profit or loss status of a business, it is advisable to use a profit and loss statement. Which is the sum of total revenue of a business minus total expenses in a period either weekly, monthly, quarterly, or annually. In other tot understand what you are doing first you need to understand revenue, which is the money received for selling goods, products or rendering services. Expenses on the other hand is the total money which is to be spent by the business. Expenses could include but not limited to wages, cost of goods, marketing, rent, utility, insurance etc.

The ability to work the profit and loss statement of a business is the first step to understand either to restructure the business or improve the business. A business without proper look into profit and loss will at the end of the day go out of business.