Do your Gross Sales basically equal your Net Sales? If yes, are you writing off A/R as bad debt within your 4000 COA series? If no, you may be over-stating Net Sales, and over-stating the expense category you’ve recorded your bad debt within.
Overview
The topline view of the P&L Statement establishes how well or poorly a business utilizes its capital, capacity, employees, and other resources to generate business. This is the topline number for your P&L Statement that reduces every subsequent revenue and expense transaction during the accounting reporting period.
The amount shown represents the total amount of money that should be collected for goods or services sold before any production costs (Cost of Goods Sold), and expenses (SG&A and Other) are subtracted during that accounting period.
This number can only be improved by selling more, raising selling prices, or reducing discounts and bad debt write-offs. Every dollar of Gross Sales has the potential to be a full dollar that you can use to pay expenses with what’s left after paying ALL expenses being your profit.