Free consult & free copy of book

E-Myth – “Why most small businesses don’t work & what to do about it”

Contact Us

Stars

Most 5 star CPA Google reviews in Canada

Read Reviews

Chartered Professional Accountants E Myth

1 Fixed Monthly Fee - Planning | Accounting | Taxes | Consulting

Helping Canadian businesses beat the odds!

Vancouver CPA | Planning a Quality Income Statement

Vancouver CPA says 80% of small businesses score less than 70% on basic business literacy tests.

Entrepreneurs often have long income statements that fit on three or four pages, yet that propels them to make bad choices. Also as a direct cause of longer income statements is the fact that they might eventually run a cash, they’ve hired staff but can afford to pay them or they bought equipment that isn’t quite working out.

Vancouver CPA alerts us to the four main sections that you should pay attention to two when income statement. Number one revenue revenue is the gross amount that you are bringing in to your business. number two the cost of sales. The cost of sales directly related to providing those services. For example the staff, and the materials. Number three, general expenses. The general expenses can account for rent, administrative staff salaries etc. Number three general expenses. The general expenses can account for rent, administrative staff, the advertise Asian on a building, office supplies, etc. Number four other income and expenses. The other income and expenses don’t necessarily relate to the day-to-day operations of the business. Those could be monthly bills such as power, sewage, electricity, Internet, phone, etc.
Is a very good idea to organize your income statement in numerically descending order as it will keep you focused. Draw a line down the middle of the page, the big important numbers should be at the top. Pay attention, too, the gross margin. Business owners tend to be fixated on small items rather than the big less common weekly or monthly items.

Your income statement should definitely be no more than one page long. You need to make business decisions intuitively and quickly. Summarize everything on one page so that you can make those decisions in a timely fashion and quote the proper numbers.

Classification variance analysis when your chart of accounts gets too big can be a nuisance. Keep classification to a minimum. The more classifications you have, the more ambiguous or confusing it will get.

Yes, feel free to use sub accounts, but don’t cloud the big picture. You may even consider using items, and most bookkeeping software has this option.

Vancouver CPA recommends no more than three revenue accounts because that’s where the planning happens. Most businesses can boil them down to do more than just one. After all, it’s all about getting to an average, then you can use reliable projections of that average.

In most businesses, the most significant general expenses can also be the key culprits. These are generally going to be the cost of administrative salaries, rent, and the amortization of the property and equipment. If you can make a positive adjustment to at least one of these three factors, that will make a positive change in your revenue.

The other items that go in to the other income and expense category, as now you do have to account for salaries to owners, their dependents, etc. Corporate tax is also going to be one of those items. Vancouver CPA also says investment income is also one of the items.

Let’s talk about a successful versus unsuccessful income statement, according to Vancouver CPA.

80% of small businesses score less and 70% on a basic financial literacy test. Entrepreneurs make the mistake of preparing long income statements of three or four pages long, and neglect such things as them running out of cash, them hiring staff but can afford to pay them, or they bought equipment that isn’t working out.

Vancouver CPA introduces you to the four main sections of income statement. Number one revenue. Revenue is the gross amount that you are bringing into your business.

Number two cost of sales. Cost of sales is directly related to providing those services, staff, materials, etc., which is directly related to the products.

Number three general expenses. Examples of general expenses are rents, administrative staff, amortization of the business and building, office supplies, etc.

Number four other income. Other income and expenses don’t necessarily relate to the day-to-day operations of the business.

It is a good idea to organize your income statement in numerically descending order as it will keep you focused and organized. If you draw a line down the middle of the page, the big numbers will be at the top. That will allow you to understand the gross margin. Business owners tend to be fixated on small items instead of the big picture.

Make sure your income statement is no longer than one page long. Be assured that you can summarize all of the necessary information on just one page in order to keep you focused and organized. Vancouver CPA stresses that this is a good idea as this will keep you focused and organized in order to summarize the information in a quick manner, to decipher the information quickly, and make decisions in a prompt, intuitive manner.

On the occasion that your chart of accounts gets too big, the classification and various analysis is best to be kept to a minimum. The more classifications you have the more ambiguous and confusing it gets.

Vancouver CPA states that it is in fact all right to use sub accounts. You may even use the items option, as most bookkeeping software has it. However, don’t cloud the big picture.

Vancouver CPA recommends no more than three revenue accounts as that is where the planning happens. You can still boil them down to do more than one, however. It’s all about getting to an average, then you can make reliable projections of that average.

In business is the most significant general expenses and the key culprits if you will is generally going to be the cost of administrative salaries, rents, and the amortization of the property and the equipment. If you make a positive adjustment on one or more of these expenses you will find a positive change in your revenue outcome.