What is the Profit and Loss Report in QuickBooks Online and When to Use It?

The Profit and Loss Report (often referred to as the Income Statement) is a crucial financial report that helps businesses understand their company’s financial health, track revenue and expenses, and make informed decisions. QuickBooks Online provides a user-friendly platform for generating and analyzing the Profit and Loss Report. 

In this article, we’ll explain in detail the Profit and Loss report, when businesses need it, and how to run it in QuickBooks Online.

What is the Profit and Loss Report in QuickBooks Online?

The Profit and Loss Report summarizes a company’s revenues, expenses, and profits (or losses) over a specific period. It provides a snapshot of a business’s financial performance and is typically generated on a monthly, quarterly, or annual basis. The primary goal of the Profit and Loss Report is to showcase whether a company is operating at a profit (revenues exceed expenses) or at a loss (expenses exceed revenues).

Sample profit and loss report in QuickBooks

When Do Companies Need the Profit and Loss Report?

Businesses need the Profit and Loss Report for various reasons, including:

• Monitoring Financial Performance: Regularly reviewing the Profit and Loss Report helps business owners and stakeholders understand how well the company is performing financially. It provides insights into whether the business is profitable and where expenses may be impacting profitability.
• Budgeting and Forecasting: Businesses use the report to compare actual financial results to budgeted figures. This aids in assessing whether the company is meeting its financial goals and identifying areas that may require adjustments.
• Tax Reporting: The Profit and Loss Report is essential for calculating taxable income, allowing businesses to report accurate financial information to tax authorities.
• Investor Relations: When seeking investments or loans, businesses often share the Profit and Loss Report with potential investors or lenders to demonstrate their financial viability.
• Decision-Making: Business leaders use the report to make informed decisions about cost-cutting, pricing strategies, and revenue-generating activities.

How to Run the Profit and Loss Report in QuickBooks Online

• Step 1: Navigate to the Reports Menu: From your QuickBooks Online company dashboard, go to the left-hand menu and then click on Reports.
• Step 2: Select “Profit and Loss”: In the Reports search menu bar, type Profit and Loss.
• Step 3: Customize the Report: QuickBooks Online allows you to customize the report to fit your needs. You can specify the reporting period (e.g., a specific month, quarter, or year) and other filters. You can also choose between accrual or cash basis accounting, depending on your preference.

Creating a profit and loss report in QuickBooks Online

• Step 4: Generate the Report: After customizing the settings, click the Run report button to generate the Profit and Loss Report.
• Step 5: Analyze the Report: Once the report is generated, you’ll see a detailed breakdown of your revenues, expenses, and net income (profit or loss). You can review the report on-screen or export it to various file formats, such as PDF or Excel, for further analysis or sharing with stakeholders.
• Step 6: Save and Share (Optional): If needed, you can save the report for future reference or share it with your accountant, business partners, or other relevant parties.

Wrap Up

The Profit and Loss Report is a critical financial tool that every business should utilize to assess its financial performance, make informed decisions, and meet reporting requirements. By regularly running and analyzing the Profit and Loss Report in QBO, businesses can stay on top of their finances and make sound financial decisions to drive growth and profitability.