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Step-by-Step Process to Create a Quickbooks Profit and Loss Statement


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Want to learn more about creating a QuickBooks profit and loss statement? You’re in the right place.

To understand the financial health of your business, it is critical to know how profitable your business is over time. Today’s accounting software offers you the capability to create multiple financial reports, including financial statements, such as the Profit and Loss Statement (P&L). Your P&L statement explains the income and expenses that lead to a company’s profits or losses. The document proceeds from top-line revenue to the bottom line. It’s ideal for you to regularly review the changes in P&L statements over multiple periods, such as monthly or quarterly. This report can help you understand what is behind your company’s profitability by categorizing revenue and expenses. If a business spends more than it earns on production, you can view operating profits separately from financing costs and taxes. If any parts or materials are required as part of your manufacturing process, those costs typically go under the cost of goods sold (COGS). The statement will also subtract from yoru income any expenses necessary to run the business, which gives you the operating profit.


quickbooks profit and loss statement


If your company borrows money, then excessive interest costs could wipe out any profit. As you examine your interest expenses, you can determine whether you are using debt wisely as a financial tool for long-term growth. After subtracting everything, you arrive at the net income for your business.


To understand how you can create this P&L statement, you need to know how your online accounting software operates. Let’s start by looking at one of the most popular accounting software options, Quickbooks Online.


What is Quickbooks Online?


Quickbooks Online is a cloud-based accounting software requiring a monthly subscription fee that gives you access to your financial information from any internet-connected device. There are four subscription levels, depending on the features and the number of users. This software is also compatible with Quickbooks Online Accountant and is considered the industry standard for small-business accounting software, but it does have a learning curve.


How Do I Create a Profit and Loss Statement in Quickbooks Online?


To build a P&L statement on Quickbooks Online, you need to have your bookkeeping in order, otherwise, the data will not be available to create an accurate report. With that in mind, let’s talk about the steps you need to take in order to be sure that your data can be interpreted correctly by the Quickbooks accounting software.


Step 1: Setting Up Chart of Accounts

A chart of accounts is a list of all the accounts available for recording transactions in your company’s general ledger or accounting software. It is also the first step in creating your accounting system and organizing your financial information. To determine what accounts need to be included in your chart of accounts, you must understand the different account types available.


Understanding account types

There are five categories of account types that are universal to all businesses, regardless of their industry. These are:

  • Asset accounts
  • Liability accounts
  • Equity accounts
  • Revenue accounts
  • Expense accounts


Regardless of the accounts you create for your chart of accounts, they will all fall into one of these categories. When you create the accounts for your business, think about the type of business you run since a service-based company might have different accounts than an e-commerce business. Be sure to add accounts cautiously since having too many accounts can make your financial reports confusing.


Creating income accounts

These accounts should be everything that makes income for your business, from sales to investment income. Any type of revenue needs to fall into one of your accounts or be a separate account under this category.


Creating expense accounts

Your expense accounts should focus on the different levels of operations, such as payroll, taxes, rent, utilities, marketing, and other costs related to operating your business on a daily basis. You want to track operating expenses for different locations and departments by creating sub-accounts for each expense account for every department or location.


Setting up cost of goods sold (COGS) accounts

The COGS accounts should be focused on how much it costs for you to produce the products you are selling, and this should include the costs of raw materials and production.


quickbooks profit and loss statement


Step 2: Collecting Revenue Information

Quickbooks Online provides a variety of options for recording revenues, including invoicing and exporting bank information into your account. Here are some of the methods available to collect critical revenue information and categorize it accordingly.


Tracking sales and invoicing in QuickBooks Online

Your chart of accounts allows you to get an overview of where you are getting cash payments and where your revenue is coming from. With sales and invoicing options built into the software, you can easily categorize transactions, thus creating an accurate P&L.


Reviewing sales reports

QuickBooks Online offers the ability for you to run regular sales reports, getting a clear idea of what products and services are producing the most income while also helping you to maintain the accuracy of your financial reports, including the P&L.


Step 3: Gathering Expense Data

Part of regular bookkeeping is making sure that all expenses related to your business are accurately recorded. There are several options that can assist you with recording and categorizing all your expenses.


Entering expenses in QuickBooks Online

Using the data sync, your bank and credit statements can be aligned so transactions are inputted into your financial database either monthly or as they occur. You can also attach any other sales accounts, which include Square and Paypal. Any transactions not covered in the data sync should be manually inputted by your bookkeeper into the system.


Categorizing expenses accurately

As transactions are inputted, they need to be accurately categorized according to your chart of accounts. Quickbooks Online offers the ability for you and your bookkeeper to create rules that will assist in this process while also giving you the ability to review transactions on a daily and weekly basis to make sure everything is accurate.


quickbooks profit and loss statement


Step 4: Tracking Cost of Goods Sold (COGS)

Part of tracking the cost of goods sold (COGS) is making sure that every cost is accounted for and accurately inputted into your financials. To do so, you can utilize the various options available through Quickbooks Online.


Tracking inventory in QuickBooks Online

Turn on inventory tracking in your settings, then add your inventory products, giving them individual SKUs. Once you have all your inventory products set up, you can track what sells and restock your inventory with reminders from Quickbooks.


Recording Cost of Goods Sold

To calculate COGS, add the cost of inventory at the beginning of the year to purchases made throughout the year. Then subtract the cost of remaining inventory at year-end. There are other inventory costing factors that may influence your overall COGS, such as first in, first out; last in, first out; and average cost. Cost tracking is essential to calculating the correct profit margin of any product or service, plus it helps you to calculate the true value of your inventory since it is your largest business asset. To be sure that you can produce accurate data for your tax filing, it is important to use the same costing method throughout the year.


Step 5: Ensuring Accurate and Complete Data

Working with a bookkeeper can assist you in ensuring that your company’s financial data is accurate and complete. part of the bookkeeping process includes regularly reviewing transactions, even those that have been inputted through a data sync with your bank, credit card company, or payment application.


Regularly reconciling bank accounts

Monthly reconciliation involves ensuring that the transactions in a company’s financial records are consistent with independent third-party reports. It confirms that the amounts leaving the account correspond with the amounts that have been spent, making sure that all transactions have been recorded accurately. It can also be used to explain the difference between two financial records, such as your bank statement and your financial reports. This reconciliation should be completed for all the accounts in your chart, by comparing transactions recorded in your internal record-keeping (aka Quickbooks) with your external monthly statements.


Reviewing and correcting errors

If errors are identified, then you can walk through the process of correcting those errors. First, check to be sure that all your transactions have been recorded and categorized correctly in your internal record. Secondly, if your bank combined several payments into one transaction, then you need to do the same in Quickbooks. Third, enter any transactions in Quickbooks that might be missing based upon the external records. Doing so can help you to rectify any potential errors and make sure your financials are accurate. For more help


quickbooks profit and loss statement


How Do I Generate a Profit and Loss Statement in QuickBooks Online?


To generate a report, Quickbooks Online provides a Reports tab, where you can create the financial statements you need for any type of analysis.


Accessing the Reports Section

Open your Quickbooks file and go to the Reports tab or Reports Center.


Navigating to the Reports tab

Once there, search for the Profit and Loss; Profit and Loss Detail; or the Profit and Loss Comparison, depending on the report you want.


Selecting the Profit and Loss report

After selecting the report you want, customize the settings by filtering the information according to specific dates and your accounting method.


Customizing Report Settings

You can opt to add or remove columns, change the layout, or apply filters. There are also options to filter and group the data as needed for analysis.


Filtering and grouping data as needed

Every business is different, so you have the ability to customize your reports to see the data that matters while accessing insightful business analytics.


Reviewing the Generated Profit and Loss Statement

Once you generate your P&L report, then you should review it for accuracy but also utilize it as part of your financial analysis of your business and its profitability.


Analyzing revenue and sales figures

Revenue doesn’t always translate into profits because of the costs that need to be taken into account, plus you have to account for customer returns. The goal is to achieve growth in profitable sales and revenue adjusted for risk.


Evaluating expenses and costs

Your P&L statement will show revenue at the top and profit at the bottom, but everything in between is the expenses and costs that impact your profitability. You can also use your P&L to note whether your expenses are in line with industry standards or if there are areas where you need to investigate the costs further.


Interpreting gross profit and net income

Gross profit is the total revenue minus the COGS, but net income is the amount that represents profits once you account for all expenses. When your business operates in the positive net income range, then it represents good financial health, as well as assists you in predicting what your company can expect to make over time.


How Do I Make Adjustments and Corrections to My Profit and Loss Statement in QuickBooks Online?


quickbooks profit and loss statement

During your monthly reconciliation, you are likely to find errors, either transactions that were not inputted correctly or were not categorized correctly. Here is how to address these errors and fix them to keep your financials accurate.


Identifying Errors or Inaccurate Entries

First, your reconciliation will help you to identify any inaccurate entries or potential errors. Determine if they are errors due to inputting or because of improper categorization.


Making Adjustments to Revenue and Expenses

You can find the transaction and make the necessary corrections to reflect your external statements accurately. Eliminate any transactions you know are correct to identify the ones that need to be adjusted.


Reconciling Bank and Credit Card Accounts

Use your external statements from your bank and credit cards to verify the amounts are correct for all deposits and expenses.


How Can I Export and Share the Profit and Loss Statement?


Quickbooks Online gives you the ability to generate a report and then export that by downloading it. There are also options to share the report electronically, thus allowing you to send the correct information to your accountant or banker.


Frequently Asked Questions


  1. How often should I generate a profit and loss statement in QuickBooks? It should be generated at least once a month to verify all the information is correct.
  2. Can I compare profit and loss statements from different periods in QuickBooks? Yes, by generating reports from different periods using the filtering options.
  3. Are there any pre-built templates available for the profit and loss statement in QuickBooks? Yes, Quickbooks Online will create your P&L statement based upon their template, but you can also customize the report as needed.
  4. Can I export the profit and loss statement from QuickBooks? Yes.
  5. What information is included in a QuickBooks profit and loss statement? Your revenue and expenses, which tells you what your net income is after all expenses have been accounted for.


What Is AccountsBalance?



AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.

We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.

You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.

Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.

And here’s some free resources:


In Summary


Working with Quickbooks Online means you have the tools necessary to generate financial statements, including your P&L statement. Doing so regularly will help you to see if your business is profitable while also pinpointing areas where you may need to focus on reducing expenses or adjusting your overall budget. With the right accounting software, you have the tools to complete your financial statements accurately every month.


Want help with your bookkeeping? We make it easy. Get startedSpeak w/ a Founder, or Schedule a Callback

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Tracy Knepple

Tracy Knepple

As a writer and editor with 20+ years experience, Tracy Knepple offers practical tips and analysis on accounting, bookkeeping, small business, and many other topics. She has authored over 100 books as a professional writer for the Raymond Aaron Group. She received her Bachelor's degree in Communications from Indiana University.

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