Question

In addition to a balance sheet, you want to create a profit-and-loss (P&L) statement for the first three months. Typically these statements are for a year-long period, but because your business is new, you want more frequent results. Use the information below to create your P&L statement.

Sales Revenue: $3,546
Cost of Sales (Wages and Supplies): $7,400
Gross Profit: Difference between Sales Revenue and Cost of Sales
Expenses:
Rent: $2,100
Renovations: $30,000
Utilities: $228
Equipment: $15,000

Answer 1

Net Loss: Gross Profit - Total Expenses = -$3,854 - $47,328 = -$51,182

This means that for the first three months of operation, the business had a net loss of $51,182.

Step-by-step explanation:

Here's a profit-and-loss (P&L) statement based on the provided information for the first three months of operation:

Sales Revenue: $3,546

Cost of Sales (Wages and Supplies): $7,400

Gross Profit: $3,546 - $7,400 = -$3,854 (negative number indicates a loss)

Expenses:

Rent: $2,100

Renovations: $30,000

Utilities: $228

Equipment: $15,000

Total Expenses: $47,328

Net Loss: Gross Profit - Total Expenses = -$3,854 - $47,328 = -$51,182

This P&L statement shows that for the first three months of operation, the business had a net loss of $51,182. This is largely due to the high costs associated with renovations and equipment, which were necessary to start the business but did not generate immediate revenue. The negative gross profit is an indication that the cost of sales (wages and supplies) exceeded the revenue generated from sales during this period. The business will need to generate more revenue and/or reduce expenses in order to achieve profitability in the future.