The Expense Budget is Part of the Profit and Loss

Chapter 13: Expense Budget - Page 13.4

The Expense Budget is Part of the Profit and Loss

As you build your expense budget you are also creating your projected profit and loss. The profit and loss includes sales, cost of sales, and expenses. With the way business numbers work, your expense budget will eventually become part of your Profit and Loss table, which we discuss in Financial Analysis: The Bottom Line. If you're using a personal computer with spreadsheet or business plan software, you should expect to see automatic linking so the expense budget is absorbed in the Profit and Loss tables. The illustration below shows a standard profit and loss, with the expense budget showing as the Expenses portion of the larger statement.

Standard Profit and Loss Statement

This example is a simple budget that doesn't divide expenses into categories. This is ideal for smaller businesses with only a few employees. By the time you have workgroups and a slightly larger business, however, you'll probably end up dividing expenses into categories such as sales and marketing expenses, administrative expenses, and other expenses. We will look at the Profit and Loss statement in more detail in Financial Analysis: The Bottom Line.

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