 QuickBooks Desktop 2023, Vertical Analysis, Profit and Laws, P&L, Income Statement. Let's do it within 2-its, QuickBooks Desktop 2023. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. Here we are in QuickBooks Desktop Sample Rock Castle construction practice file provided by QuickBooks going through the setup process we do every time. Maximizing the home page to the gray area in the view drop down we got the hide icon bar open windows checked off open windows open on the left hand side reports drop down we're going to be opening up the profit and loss the P and the L the income statement ranging to the change in we're going to go from 010124 to 123124 customize that report fonts and numbers change the font to 12 okay yes and okay let's open up the balance sheet to so going to the reports drop down company and financial the big B balance sheet down below hitting the drop down we want to bring this then to the fiscal year of 123124 customize in the report to the fonts and numbers so we can change it to 12 okay yes okay there's the setup process we do every time we're focusing in on the P and L profit and loss income statement type of reports last time we did a comparative report doing kind of a horizontal type of analysis you might call it this time we want to do a vertical type of analysis remembering that in prior sections we did this on in essence the balance sheet and we saw that we get that vertical kind of component or vertical analysis that kind of compares everything to the total assets let's do it real quick on the balance sheet just so we can remember what happened if I go to the customized reports on the balance sheet and we hit this percent of columns item I'm going to hit it I didn't really hit it that hard I just I clicked it really I didn't really hit it but I'm going to say okay if I hit it it wouldn't it's not be alive anymore if I hit it that's what I'm talking in case so we got the total assets down below and he gave us a percent of each asset as compared to the total asset each liability and equity as compared to the total liability and equity now it's a little bit different on the income statement or the profit and loss because the total or the bottom line number in essence of the income statement represents net income assets minus liabilities so it doesn't really make sense typically to compare things to net income what we really want to be doing is comparing things to the goal of the business particularly the profit and loss that's income generation in other words you can think of the income statement as in essence income and expenses the goal of the business is to generate income revenue generation all the expenses that we are incurring are done so in order to generate the end goal of income so typically when we do this kind of vertical ratio analysis we want to compare everything not to net income but to total income so that'll be the general idea you can see the difference here when I go to the customize up top to do this to click this off when I hit it when I hit this thing we're going to go down here and you've got some different items you got the percent of row you got the percent of column I'm not going to use the percent of column this time typically what is going to be used is the percent of income meaning I want to take in essence every number on the income statement and compare it to the main goal of income statement of the business generating revenue the income line item so we'll check this one off and then we'll say okay so there we have it now you can tell that that one is the one that we're comparing everything to because it's the only one that has 100% next to it as the percent meaning you're taking this divided by itself one or 100% everything else is being compared to it so on the income side of things that kind of makes sense or similar to what we saw on the balance sheet so we might say okay well yeah if i'm taking like this construction income and comparing it to total income 447 537.34 divided by total income which is this 545 657.14 gives us about 82 if I move the decimal places over hold on a second that didn't come out right did it let's do it again 447 537.34 divided by this number 454657.14 gives us about that looks right 94.4 percent so and that kind of makes sense because we're comparing it to the category total down here and we can think about each of our income line items and think about which one of them is most important to us as compared to our total income line item that could be useful so that we can obviously identify what our big moneymaker is but also we might be benchmarking to other companies and trying to trying to mimic them typically larger companies because we're looking up to people and trying to imitate people that we admire that are making more money than us basically so so we can't really compare our dollar amounts to them but we might be able to compare our percentages to them now given that you might say well then on the income statement side of things shouldn't we be comparing all the expenses in essence like to total expenses down here you could do that but but really you on another way of thinking of it is all the expenses are there to generate the income so since that's kind of like the goal of the business it's common for us to compare everything to that income line item so we still got the income line item we can compare the total cost of goods sold which is here 180124.19 divided by the income which is 454657.14 so moving the decimal two places over we're at the 30 we're at the 39.6 about now the cost of goods sold notice it's a little bit different for a construction company but those are the things that are kind of part of the inventory if we just bought things and then we marked them up and sold them and that's how we generated revenue then the cost of goods sold will typically be a huge component of our of our income right because because whatever the markup will be representing the relationship between the cost to get sold in the income in other words if all of our income was for things that we bought marked up and sold whatever that markup would be would be reflected in the relationship between the cost of goods sold and the income that's why this sub calculation of cost of goods sold breaking it out in its own expense category is a useful tool and then of course we have all the other expenses that we can break out down below we can compare and kind of get an idea of the auto versus insurance on a percentage basis once again being able to compare these to other companies as well to see if they have similar relationships on theirs especially you can see the gross wages clearly that one oftentimes this is going to be the payroll will be a significant impact on or a significant part of our expenses and a big item in relation to the income and so we can go through there and that's going to be the general the general concept of it we're just going to be comparing everything to the income line item all right so if we wanted to clean this up then we could format it i'm going to change this to a maybe an income statement just so we can make that change which could be useful if you're providing it to somebody else we'll call it a vertical analysis income statement or something like that and then this is still good here i'll remove these items on the left we'll make negative numbers bracketed and remove the pennies let's customize to do that to do that we're going to go to the header and footer and i'm going to say let's call this a vertical analysis income income statement statement and then i'm going to get rid of the date the time the report basis let's put our name in the footer put our name in the footer and then fonts and numbers we changed it to 12 on the size let's put some parentheses around the negatives let's remove the pennies let's make the negatives read that's what our custom has been so we're going to say okay so there we have it vertical analysis another report that can be quite useful and we can batch that together as we're putting together our month end possibly our quarter end our year end reports that we might be providing to our our clients note that we could also create this column as well when we do comparative reports as we saw in the past so you might say hey i like i like that column it might as well add that in as i do like comparative reports possibly changing the date here from let's say let's say we took it from 10 oh one two four and then i did this kind of comparative report by saying totals and bring it down to a month for example it gets quite long because now you have these extra columns but now you've got november uh you you've got november you've got october november and december and then you've got the percentages as well so that's a little long so maybe like two periods would be good for that kind of report so maybe you did the last two quarters for example maybe i went from oh seven oh one two four to december the last half of the year and then said let's make it on a quarterly basis and okay so then now we've got two quarters and the percentage for both and the percent for the total maybe that's not too much and it could be digestible and give that more information it doesn't work so well if you do the other kind of comparison with the previous period because that's typically designed to use kind of like the percent change and the dollar change here but you can experiment with using those types of reports and trying to include like a vertical analysis column as well