net profit verse net income

Kimberly Thrupp
Kimberly Thrupp Member Posts: 4
edited September 2018 in Accounts Hosted
I would like my Profit and Loss report to show net income, then taxes to be paid, then net profit ( gross profit - expenses - (taxes + interest).

Please help ...

Comments

  • gazza73
    gazza73 Accredited Partner Posts: 802 Accredited Partner Accredited Partner
    edited February 2017
    Consider using the 'Other Income'  and 'Other Expenses'  categories in your Chart Of Accounts.
    For instance:  Payroll Tax could be setup as an 'Other Expense'.

    I typically split "Other Expenses", which sit below the Net Ordinary (read: Trading) income,  into  Non-deductible expenses (IE: Fines and Surcharges that are not tax deductible),  and another set of sub-accounts (ie:  Taxes:  SRO PTX for instance).    You could put Interest down there as well, and then your Overheads can be expressed in terms of a percentage of (normal trading) Income rather than the lot.   And more importantly,  you've separated your desire to split off Interest and Taxes from your COGS (above Gross Profit) from your overheads in (normal) Expenses.

    These are just Management Accounting,  Cost Accounting, Key Performance Indicator like ideas for running the business internally.

    Note:  If you have existing DATA in the old Chart Of Account accounts already, you'd need to journal the balances from the old accounts to the above suggested 'Other Expense" type accounts,   and then you could mark the original accounts as inactive.

    Gary 0408994799 anytime
  • Kimberly Thrupp
    Kimberly Thrupp Member Posts: 4
    edited May 2015
    pay roll tax is a liability and i am aware liabilities do not show on P&L's.

    i would like to show GST on my P&L, so my boss knows exactly what profit will be made.
    as it stand the P&L report only shows net income not net profit. as far as i can work out this is EBIT
  • cosmic
    cosmic Reckon Developer Partner Posts: 1,073 ✭✭✭
    edited September 2018
    no , incorrect, payroll tax is deductible expenses, needs to be shown in P&L,its indirect tax , like FBT, it must be shown in your PL ACCOUNTS. Consult your tax agent in this matter, i would advise.

    Cosmic Accounting Group

    Accountants and Tax Agents 22397009

  • gazza73
    gazza73 Accredited Partner Posts: 802 Accredited Partner Accredited Partner
    edited February 2017
    Chandra is correct.     As for the terminology,   Reckon Accounts have long had the bottom line (income less COGS less Expenses)  as a line called Net Ordinary Income.  And then further, if there are Other Income and/or Other Expense accounts, then the bottom line is Net Income.

    Using Other Income and Other Expense  accounts opens up the opportunity to structure your P&L along the lines of your desire to have a line that represents EBIT,  where the bottom line is effectively EBIT if you put interest and tax (deductible items) into say: Other Expenses. 
  • Kimberly Thrupp
    Kimberly Thrupp Member Posts: 4
    edited May 2015
    as stated in the below site, PAYG Withholding and GST payable is a liability.
    https://www.coag.gov.au/node/63
  • gazza73
    gazza73 Accredited Partner Posts: 802 Accredited Partner Accredited Partner
    edited February 2017
    Kimberley. 
    a)  PAYG is both an expense, and until it is paid during BAS, it is a liability
    b)  GST  is only a liability, in its own right, until it is paid, whereupon it is settled as a reduction of your bank fund (B/S only)
    c)  Payroll Tax (ie: PTX paid to the SRO if in Victoria for instance),  is an expense to the business, and would sit in the B/S as a liability until settled on the 7th of the month
    d)  There are heaps of other, but the above are the main ones for most businesses.

    I believe the point you're more concerned about, is when any of these non-trading like 'expenses' (if they are in fact expenses at all), are put into a P&L report,  you'd like them to appear deeper/lower down the P&L below the trading profit (Net Ordinary Income),  and just short of where the bottom line shows Net Profit (displayed as Net Income on Reckon).
  • Kathy Mackinlay_6947388
    Kathy Mackinlay_6947388 Member Posts: 141
    edited May 2015
    I would have thought if you have your wages (gross) expense on your P & L and then put the PAYG amount as well that would be double dipping. the wages total includes the PAYG. Just my thought.
  • gazza73
    gazza73 Accredited Partner Posts: 802 Accredited Partner Accredited Partner
    edited February 2017
    Kathy, 

    If the wages is GROSS, you're correct.  In the systems I play with,  we split out the gross into nett + PAYG less deductions.  Why?  So we can enjoy using some nice sub-totals for seeing the PAYG that is due at BAS time for instance.  

    Hence my comment about the PAYG being an expense.  If that expense is already catered for inside of some other expense, then that would be true.  I'm just focussing on the assertion in this forum article about whether some types of taxes are ever deductible or not per se.  GST is the odd man out in the first answers - it is never deductible as an expense of course.

    Gary
  • Kathy Mackinlay_6947388
    Kathy Mackinlay_6947388 Member Posts: 141
    edited May 2015
    Hi Gary, thanks for explaining that. I understand what you are saying and it makes sense to me now. Cheers, Kathy