 QuickBooks Online, Vertical Analysis, Profit and Loss, P&L, Income Statement. Get ready to start moving on up with QuickBooks Online. We're going to be using the free QuickBooks Online Test Drive, searching in our online search engine for QuickBooks Online Test Drive, choosing the option that has Intuit.com and the URL into it being the owner of QuickBooks. 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. And we're going to be choosing the United States version of the software and verifying that we're not a robot. People often think I'm a robot because of my Superman-like strength, but no. Anyways, we're going to scroll in a bit by holding down control up on the scroll wheel currently at the 125% on the zoom in. We're going to hit the cog dropdown, noting that we're in the accountant view as opposed to the business view. We'll try to toggle back and forth between the two views to see where things are located within them. We're going to be duplicating a tab up top to put reports in as we do every time. Right click to duplicate the tab. Right click the duplicated tab for a double duplication back to the tab to the middle. As the tab to the right is thinking reports on the left and then the balance sheet. And then as that's thinking, I'm going to go to the report on the right or the tab on the right and then the report on the left. And then the profit and loss or the income statement, the P to the L. Then I'm going to close the hamburger and also known as the hamburger and then change the name from 010122 tab 123122 tab run it to refresh it tab to the left. It's still thinking you're still thinking. I'm going to go up top. We're going to close the hamburger and range change 010122 tab 123122 tab run it. That's the setup process we do every time back to the tab to the right. We're now going to be doing what we would call a vertical analysis. So remember these are our main two financial statement reports balance sheet income statement, otherwise known as the P and L profit and loss. And we looked at comparative or horizontal analysis last time, which often takes the place of or looks like or will look like having one period compared to a prior period. And then the difference between the two and a percentage change. Now we're going to do a vertical analysis. Now note when we did the vertical analysis on the balance sheet, it's kind of a little bit more straightforward because we compare everything to like the asset line. But on the income statement, it doesn't really make sense for us to compare everything. Well, it's not the most common thing to do to compare everything to net income, the bottom line. It makes the most sense to do a ratio analysis of vertical analysis structure to compare everything to the goal of the business, which is revenue generation and that's income or revenue. So we're going to compare everything to the revenue line. That's the most common format. So let's see what that looks like. It's quite easy to do as long as you can pick the right item here. So we'll hit the dropdown and you've got these percent of rows. That's not quite as useful on an income statement. Usually unless we're breaking it out in some way, you've got your columns, which you would think maybe that would be the way to go for a vertical analysis and then you've got your income. That's the one we typically want. You could have a percent of expenses as well, not quite as common. You could do a percent of the column, but not quite as common, the percent of the income. That's what we want because income, revenue, that's the goal of the business. That's the main point. So we want to compare everything to it. So now we're going to pull out, let's pull out the trustee calculator for some calculations. And then, so now we've got our income. We can tell that this is a comparison to income because the bottom line of the income here, 100%. So it's comparing it to itself. Now it makes sense to look at the income line items and you're saying, yeah, it makes sense up here. Everything is a percentage of income. Just like on the balance sheet, everything was a percentage of the assets. Let's go to the balance sheet just for a comparative view. And you'll recall when we did this on the balance sheet, if I hit this dropdown, you've got a bit different choices down here. We don't have as many choices because it's a point as of a point in time report. And we're going to choose the percent of the column on this one and then run that. And this compared everything to the assets, which makes sense. And the liabilities and equity to liabilities and equity. And you visualize a nice pie chart when that happens. You go, oh, okay, that makes sense. I can break that out into a pie chart. It's kind of like looking at my investment portfolio, investing in bonds versus stocks and whatnot or something like that. And these are investments in my assets in the business that I'm using to generate future revenue compared to the total assets. If you look at the income statement, then usually we compare to revenue. The top half looks similar. These are all the income line items compared to total income. I can make a pie chart of that if I wanted to. So this would be 2246.5 divided by the total 10200.77. Two places over on the decimals 22.202. So that makes sense. But note that on the revenue side of things, you usually don't have this many accounts. You usually only have like one to five revenue accounts. They have more here because it's a construction kind of company. But on the expense side, it doesn't make as much sense. You're like, okay, well, I would expect then all my expenses to be compared to the total expenses. But no, we're going to compare all the expenses, those things that we have to consume in order to generate the revenue. That's what an expense is to what we use them for the revenue line item. So you can't create a nice pie chart with the expense side of things. This isn't going to add up to 100% in other words, because we're comparing to the revenue line item. So I can go up top. You could do a bar chart if you wanted to, if you want to do a graph on it. So if you're feeling like you need some kind of visual. But we can then do the 471.86 divided by the total income, which is here divided by the 10200.77. If we move the two places to the right, you get 0.73%. So we're comparing everything to income. Note that the cost of goods sold is usually if you just sold inventory quite high. That's why we have this comparison of the gross profit. And it's usually going to be something that if someone just sells inventory, they're quite aware of the relationship between the cost of goods sold and the income. And then we can look down here on a percentage basis and we can see the dollar amount and we can also see the percentage as comparison to the revenue. The revenue in essence, what we're pulling in or earning the expenses, what we consumed in order to generate that revenue. Note that if I'm comparing my data to prior data, I can compare the dollar amounts. But if I'm trying to benchmark to the industry average or to another company, which is usually larger than my company because I'm trying to get better. I'm trying to increase oftentimes. Then I can't compare the dollar amounts, but I could compare the percentages. Like I say, okay, how much is their cost of goods sold? How much is the industry average percentage cost of goods sold compared to their income, which gives us an idea of what their markups are for the inventory that they're selling? How much do they spend on advertising? Do they spend a lot on advertising? Advertising is one of those areas that's quite confusing for a lot of people, including myself. It just drives you kind of crazy because there's so much money that you spend on advertising. It just seems ridiculous. But in any case, then of course, insurance, how much are they spending on employment? You can look at the key line items here and compare them to the income line item. Okay, so then if you go up top, you could do the other kind of vertical analysis just to test them out, but they're not as common. That's the one you want to know. If you go to a percentage of the column just to take a look at it, the total column adds up to net income. So now we're comparing everything to net income, the bottom line. So here it is 100% on the net income. And if I was to compare some other line item to it, you're going to say expenses are 5237.31 divided by 1642.46. If I move the decimal two places to the right 318. So you're going to get some funny numbers. This might be helpful for some ratio analysis, but it's not the most common way you're going to see this kind of report. So it could be useful in some cases, but it's probably not like the standard report that you would be generating in a package of reports. You could then do a percentage of expenses. So now you're comparing everything to the expense line item, which is probably useful down here when you're looking at the actual expenses. Because now you can kind of look at it more of a pie chart analysis in terms of your expenses and see where you're spending the most money in relation to total expenses. Here's your total line item. So all of your expenses right here will then total up to 100%. And you could think of it in a pie chart format instead of comparing your expenses to the revenue generation. So that could be useful. I would think just for this expense area, but probably not as useful comparing your revenue to total expenses. It's probably not as common of a technique. So I'm going to hit the dropdown again. Your most common thing here would be comparing to income, boom, run it. And then you could also have multiple periods where you include a vertical analysis. So for example, I could say I'm going to hit the dropdown and change it from the totals to month or let's go to quarters, quarters. So now you've got multiple quarters that also give you the vertical analysis. So when we're starting to think about how we're going to present these reports, I typically think of the technique to be I'm going to start simple with a simplified profit and loss, possibly a single step profit and loss, if I can, and then get more detailed going into it, assuming that the people I'm dealing with aren't accountants oftentimes. They don't want to be overwhelmed with data, but sometimes they do. Sometimes you might say, hey, I don't need this redundancy of multiple reports that have the same information, because I still have the total over here. Maybe you make one report that has a lot of detail on it and therefore you don't need the more simplified reports that are giving you the detail or the same information in less detail. And then you've got to compare how many reports do I want with a vertical analysis? How much is that going to add versus clutter the report? And then how many reports do I want to be putting together in terms of comparative type of reports? You probably want to break that out on a month by month or on the basis of, I'm going to group my reports to those I'm going to give in a month by end and a quarter end in a year end. That's how I would think of it. I'm going to go back to the totals and then I'm going to just say that I would then customize it up top and then get rid of the cents, brackets, red. This is what we do every time if I was going to give it to someone externally. I'm going to change the header. I'm going to make it a income, let's say vertical, let's say income statement, vertical analysis, and then get rid of the date, time, report basis, boom, and run it. I was running, so there you have it. And then you could save that beautiful report, save customization so that when you're going to print these out on a monthly basis perhaps, I can go to the first tab. I can refresh that tab so it's fresh stuff is in it. It's just like eating a salad right from the garden. It's nice and fresh. And then I'm going to go to the reports and then custom reports. There it is. There it is. That looks good. Okay, so let's just take a look at the business view just to see where we've, where our stuff is located on the business view. We've only been looking at the reports. So it's pretty straightforward here. You'll recall here's the home page, the get things done page. That's what they call it. I don't know why. It's a little seems a little, but whatever home seems easier to say get things done. I get I'm going to the get that's you got to go away from home to get things done. Usually unless you work at home, I guess like most people anyway. So here's the reports standard customization. There it is.