Income and expense reports are important reports for a business that helps them identify their financial position and understand whether their business is in profit or loss. For every business and organization, there exists some records and reports that help in decision making. Without the availability of these reports and records, the businesses will be blindfolded and will have no clue where to move next.
They can make future decisions like; whether they need to cut down any expenses or add some expenses based on these reports. If their business is generating higher profit rates, what factors or elements are causing this high-profit ratio.
Keep scrolling the article to understand the main difference and objective of income and expense reports.
Key differences between income and expense reports
For any business or organization, its expenses and income amount matter greatly in deciding whether the business is in profit or loss. For a better understanding of the total expenses and income, they are enlisted on different documents. There is a key difference between income and expense reports regarding the columns’ data, entities and figures.
Below is the main difference you will find in an income and expense report.
- Credit and debit
An income report will have all the details of the amount credited into your business for a specific week, month or year. On the other hand, an expense report will have all the details of the amount debited from your accounts or business to purchase goods, services, or other elements.
- Profit loss
The income report will discuss the profit rates and profit amount of a business at the end of the report. It will discuss and highlight the key elements that were the reason for increasing profits. At the same time, an expense report will discuss and highlight the elements that were the reasons for business loss. It will show the total loss amount at the end of the report.
- The amount payable and amount receivable
The income report will highlight the elements and portions for a business from which they are yet to receive the amount or have successfully received it. The expense report will discuss the payables and dues that a business has to pay to other entities against their availed services.
Enlisting the amount receivable and payable in income and expense reports will help a business track its financial position and develop audit activities. These reports provide a base for making income statements, which are very important statements for any business or organization. Hire the bookkeeping and accounting firms in Dubai and track all your expenses and income to develop such financial statements.
What is an expense report?
An income report enlists all the details of the amount going out of the organization or a business. It includes all the expense details such as the bills, payments, payables, and dues. An expense report will include all the expenses that are necessary to keep the business activities working. Expense reports help small and large scale businesses know the areas and elements that increase their business expenses. Some of the columns of an expense report are as follows.
- Name of service/Product purchased
- Date and time of purchase
- Total amount spent
- Vendor name
- Tax paid against the product
- Important notes, i.e., about the reason for product purchase
How to make an expense report?
The income or expense reports you make must be correct, and you follow all the necessary steps in preparing these reports.
Below are some of the main activities in developing expense reports.
1. Write all the expenses
List down all the business expenses, either minor or major—every expense matters in developing these reports.
2. Categorize the expenses
Categorize the expense and total the expenses of each category. Put all the bill expenses in a single category, expenses against the purchase of items in one category, and the payments done to your employee in a different category. It will help identify the category with high expense rates, which is helpful in decision making.
3. Add all the expenses
Once you categorize each expense and list down each category’s amount, add all the expenses at the end of the report. This subtotal will help in identifying profit loss ratios.
4. Prepare reports and add receipts
After adding the expenses, then it is time to finalize and review your reports. It is good to attach receipts to the reports if you have any. These reports greatly help conduct audit activities as they give a brief overview of the organizations or businesses’ monthly or yearly expenses against certain incomes. Hire bookkeeping and accounting firms in Dubai to prepare necessary financial documents and conduct ethic audit activities based on these records.
Accounts and financial records are a business asset
An organization or business will fail to assess its progress and productivity without the availability of financial and accounts records. These financial records help in the taxpaying and also in claiming tax paybacks. Without any financial records, no entity or business can claim for tax returns; it is a must for organizations to keep their accounts records at least for eight years.