Which types of costs need to be considered in the profit and loss statement?
August 9, 2022 | 40,00 EUR | answered by Adele Halbscheffel
Dear Mr. Ullmann,
I run a small craft business and I am currently in the process of preparing my profit and loss statement. I am unsure about which types of costs I need to consider. I have already recorded the revenue, but I am unsure if I have included all costs correctly.
In my business, there are various costs such as material costs, personnel costs, rent for my business premises, insurance, and advertising costs. Additionally, I also have depreciation on machinery and vehicles, as well as interest costs for loans. I am wondering if I need to include all these types of costs in the profit and loss statement and if there are any other costs that I might have overlooked.
I am concerned that I may have forgotten important costs and therefore get an inaccurate picture of the profitability of my business. Therefore, it would be very helpful for me to know which types of costs I must consider when preparing the profit and loss statement.
Could you please specifically outline which types of costs should be included in the profit and loss statement and what possible solutions there are to ensure that I do not overlook any important costs?
Thank you in advance for your support.
Kind regards,
Piotr Ullmann
Dear Mr. Ullmann,
Thank you for your question and your interest in correctly preparing your profit and loss statement. It is important to consider all relevant cost categories in your profit and loss statement to get an accurate picture of the profitability of your craft business. I will now explain in detail which cost categories you should definitely include in your profit and loss statement.
First of all, it is correct that you have already recorded the revenues. These form the basis for calculating your profit. In addition to revenues, however, all costs incurred in generating your revenue must also be considered. These include, among others, the material costs, personnel costs, rent for your business premises, insurance, and advertising costs that you mentioned.
Material costs include all costs incurred for procuring raw materials and materials for the production of your products. Personnel costs include all wages and salaries for your employees. The rent for your business premises is also an important cost that should be included in the profit and loss statement, as well as insurance, advertising costs, depreciation on machinery and vehicles, and interest costs for loans.
In addition to the mentioned cost categories, there are other costs that may be relevant to your profit and loss statement. These include, for example, energy costs, telecommunication costs, maintenance costs for machinery and vehicles, travel expenses, business taxes and fees, as well as possible provisions for impending losses.
To ensure that you do not overlook any important costs, I recommend that you create a detailed list of all cost categories incurred in your business. You should also consider possible liabilities and provisions. Regular review and updating of your cost structure is also advisable to ensure that all relevant costs are included in your profit and loss statement.
I hope that I could help you with this information and I am at your disposal if you have any further questions. Thank you for your trust and attention.
Sincerely,
Adele Halbscheffel
