Generating profit & loss statement

Reading your P&L properly — and why profit is not the same as money in the bank.

Running it

Reports → Profit & Loss, then choose the period. It covers a span of time and answers one question: did we make money?

  Income
- Cost of goods sold
= Gross profit
- Expenses
= Net profit

Reading it

Gross profit tells you whether what you sell is sold at a sensible margin. Net profit tells you whether the business as a whole is viable.

A healthy gross margin with a loss at the bottom means your overheads are the problem, not your pricing. The report also shows both as percentages, which compare between months far better than the raw figures do.

The misreading that catches people

Profit is not cash. Work invoiced counts as profit the moment the invoice is raised, even if nobody has paid. You can show a strong profit while the bank account empties, because that profit is sitting in Accounts Receivable.

Read the P&L to understand whether the business model works. Read the Cash Flow report and your bank balance to understand whether you can pay people next week.

Before you trust the numbers

Four checks, in order:

Does the Trial Balance balance?
Does the Balance Sheet balance?
Does every bank account reconcile to its statement?
Does AR Aging agree with Accounts Receivable on the Balance Sheet?

If all four pass, the P&L is built on sound books. The reports chapter of the Kinxso Accounts manual explains each one.