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The Operating Statement is more commonly known as a Profit or Loss Statement. We use 'Operating Statement' to emphasise its importance to the Enterprise since it contains the information about the performance of the business over any period that you define, unlike the Balance Sheet that is a view of the status of things at a point in time
You can define the period over which the results are shown to be as long or as short as you wish, though generally the shortest term is one month. From such a report you can make comparisons with like periods or review the performance year against year
The Op03-Jan-2011ich shows
the total income during the period
the costs of creating that income
the expenses incurred during that period
the profit that is made from the operation during that period
A typical Operating Statement will look like this
2,000.00 <1,000.00> 1,000.00 <90.00> 910.00 In most enterprises it is useful to seperate the profit (Gross) made from sales of the product or service from the overall profit (Nett) that will remain after expenses have been charged. Thus the difference between the income from sales for the period and the costs of creating those sales is known as Gross Profit. In fact this is the 'wealth' that has been generated over the period and is that which will support the enterprise for that period
There will be the expenses incurred in running the enterprise without there being any sales. These are things such as rent, utilities, selling expenses, travel, advertising, finance expenses and others which have no direct impact on the goods or services that are produced. These then, must be found from the Gross Profit and whatever is left will be the Nett Profit (or Loss) to be carried over to the next period
Taxation comes in with a charge on the Nett Profit and that can vary according to how the Government sets the rates for the year. Information on your tax liabilities and the manner in which you are required to deal with them are provided elsewhere on this site
Comments and suggestions for improving this site are appreciated and should be addressed to administration
Last Update 08-Jan-2012
Date first published 07-Nov-2005