QBO 4 - The Profit and Loss and Balance Sheet reports

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

The Balance Sheet report

Another key report in the end-to-end accounting life cycle is the Balance Sheet report, which summarizes the financial position of a business at a single moment in time. That's why it's commonly referred to as a snapshot of the business. This report reflects whether the assets the business owns are enough to offset its liabilities and leave a net equity balance after all liabilities have been paid off. As with the Profit and Loss report, clients can create a comparative Balance Sheet report by running either a Balance Sheet or a Balance Sheet Comparison report and using the Compare another period dropdown to customize the way the data is presented. This can show the financial position of the business over different periods, indicating a trend or direction of change. The example below shows how clients can use a Balance Sheet Comparison report to dive into how their equity at a specific date compares to that date the previous year. ProAdvisor Tip: To validate or prove the numbers on each row of the Balance Sheet report, the value needs to be verified with another report. To see which reports can be used to prove the Balance Sheet report, check out the Proving the Balance Sheet document.

Analyzing the Profit and Loss report

As a ProAdvisor, you can help clients understand the Profit and Loss report and how it can help them with financial planning. When analyzing it, look for discrepancies or things that seem out of place, and make sure to review the following: - Total income - Total expenses - Gross profit - Net income (also known as the "bottom line") - The Uncategorized Income and Uncategorized Expense accounts (and any transactions in the Ask My Accountant account, if there is one in use) - Changing trends and significant differences from previous periods

When analyzing this client's Profit and Loss report, which accounts would you investigate further?

Overhead Office Expenses is a new account with a significant balance, and Rent & Lease has seen a substantial decrease in value. You'll want to ask your client why this is. Ask My Accountant entries are automatically registered as uncategorized expenses by QuickBooks Online. You'll want to take a deeper dive into the transaction report with the client to agree on how each of these should be correctly categorized in the future.

The Profit and Loss report

The Profit and Loss report is the one that most clients are familiar with. It summarizes the financial activity associated with each income or expense account for a specific period, with the last line showing the net income (or loss) for the defined period. This indicates whether your client is operating at a profit or a loss. Running a comparative Profit and Loss report also allows clients to compare their business's current or past performance with that of a different period. To create a comparative Profit and Loss report, run either a Profit and Loss or a Profit and Loss Comparison report and use the Compare another period dropdown to customize the way the data is presented. From here, it's possible to define the periods to show and add columns to show the $ and % changes between them. Columns can be added to compare the specified Profit and Loss report to a previous period, year, or year to date. Adding columns helps your clients to identify trends, measure performance over time, and uncover any mispostings.

In which account would you not expect to see a balance?

The Uncategorized Asset account should have a zero balance. You'd want to investigate the transactions in this account and ensure that they get correctly categorized.

Analyzing the Balance Sheet report

When analyzing the Balance Sheet report, make sure to review the following: * Each bank and credit card account. They should agree with the register balance on the reconciliation reports * Accounts receivable * The Uncategorized Asset account * Any new asset purchases * Any prepaids, confirming they were accurately categorized * Loan accounts, making sure they've been reconciled against current ending balances * Owner transactions in the Equity section * Net income, which should match the net income on the fiscal year-to-date Profit and Loss report as of the Balance Sheet report date


Kaugnay na mga set ng pag-aaral

Music History - Elements of Music

View Set

Chapter 9: Financials and Calculations Review

View Set

Anthropology Chapter 1: Anthropology Introduction

View Set