How to Do a Nonaudited Corporate Profit Loss
Corporations can prepare a nonaudited profit and loss statement, also known as an income statement, at the end of any accounting period. A profit and loss statement displays corporate revenues and expenses over a specified period and calculates net income or loss for the period. So corporations can home in on operational performance, corporate profit and loss statements generally separate operating profit and loss from nonoperating profit and loss.
Audited vs. Nonaudited Profit and Loss
A corporation can prepare a profit and loss statement with accounting data that's audited or nonaudited. An audited profit and loss means that a certified public accountant has performed an audit and provided reasonable assurance that the financial statements are fairly stated. Some corporations never need audits, so all of their profit and loss statements are nonaudited. However, a privately held company may want audited financial statements for the benefit of outside parties. Potential investors, lenders and insurance companies often prefer to see audited financial statements before working with a company.
After identifying all sources of revenue, the company separates revenue into operating revenue and nonoperating revenue. Operating revenue for most businesses consists of sales and service fees. List operating revenue at the top of the profit and loss statement and subtract cost of goods sold to determine gross profit. For example, a company with $10,000 in sales revenue and $6,000 in cost of goods sold has a gross profit of $4,000.
After determining gross profit, the business should create a separate section for operating expenses. Common operating expenses for a business are selling expenses, administrative expenses and financial expenses. Selling expenses consist of advertising and marketing, and administrative expenses could be depreciation, rent, utilities and wages. Financial expenses generally consist of bad debt expense from collectible credit sales. Subtract total operating expenses from gross profit to determing net operating income.
After completing the operating section of the profit and loss, move on to nonoperating items. Nonoperating or secondary revenue is income that doesn't have to do with the company's primary business activities. Interest revenue, gains on sales of investments and gains on fixed assets are all nonoperating revenue. Sum all nonoperating revenues and list total nonoperating revenue.
Add up nonoperating expenses, such as interest expense from loans and losses on investments and capital assets, to find total nonoperating expenses. Subtract this figure from total nonoperating revenues to find net nonoperating revenues. Add net nonoperating revenues to net operating revenue to find the total net income or loss for the company.
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