Sales are not profit. A shop can have a busy month and still lose money once stock cost, rent, salaries and other expenses are taken out. The profit and loss report puts these in one place and answers the question every owner asks: did I make money? Here is how to read the eKhata reports without an accountant.
Key points
- Net operating profit is revenue minus the cost of goods and expenses
- Gross profit shows how much each sale earns before running costs
- The balance sheet shows what you have and what you owe
- The reports are built from entries you already make, for any date range
Choose the period
Open Reports and pick the period you want: today, the last 30 days, this month or any custom dates. Everything on the page, the cards, the statements and the logs, then refers to that period.
For a monthly check, use This Month. For a quarter or a year, set the dates yourself.
Read the summary card
The top card shows your net operating profit for the period, with the net margin as a percentage. Beneath it are the three numbers that produce it.
- Gross revenue: what your sales brought in
- Purchases (cost of goods): what the goods you sold cost you
- Total expenses: rent, electricity, salaries and other running costs
Revenue minus purchases gives gross profit. Gross profit minus expenses gives net operating profit.
Why the cost of goods must be right
Gross profit is only as honest as your cost. eKhata uses weighted average costing, so each purchase updates the product's average cost and the cost of what you sold reflects what it really cost. If you ignore cost, profit looks larger than it is.
The expense book matters just as much. A cost that never reaches the books is a cost that never reaches the report.
The trading and profit and loss statements
For more detail, open the Trading and P&L statement. It lays out the same figures as a formal statement you can print to PDF, so you can show it to a partner, a bank or your accountant. You can also export logs to Excel.
The balance sheet and trial balance
Profit tells you how the period went. The balance sheet tells you where you stand: cash and bank balances, what customers owe you, the value of your stock and what you owe suppliers. The trial balance lists account balances so the totals can be checked.
Together they show whether profit is turning into cash, or sitting as udhaar and stock.