Every bookkeeping cleanup project starts with financial reports — the Profit & Loss statement and Balance Sheet. These reports quickly reveal how the books were managed and where errors may be hiding.
Reviewing the Profit & Loss
he Profit & Loss statement gives a snapshot of the company’s income and expenses for the year. From this, we can see:
- The different types of income the business earned
- What expenses were recorded
- Differences between this year and last year
- Whether the Chart of Accounts is being used correctly
It’s not a detailed view, but it provides a solid overview of how the business operates. Sometimes you can even tell whether the bookkeeping was done by a professional or handled in-house just by looking at how the accounts are set up.
What We Look For
When reviewing the Profit & Loss report, a few red flags immediately stand out. For example, if an expense account shows a negative balance, that’s usually a sign something is wrong. Expense accounts should almost always be positive — the only exceptions are rare, unusual circumstances. In over 90% of cases, a negative expense balance points to an error that needs to be fixed.
We also pay attention to whether income and cost of goods sold are categorized correctly, whether gross profit makes sense, and if operating expenses are being grouped in the right places.
Why It Matters
If your reports aren’t accurate, you risk overpaying taxes, making poor business decisions, or running into trouble with lenders. Clean reports mean reliable numbers you can trust.
Get Help with Cleanup
Seeing strange balances or reports that don’t add up? At Akif CPA, we specialize in QuickBooks and Xero cleanups to restore accuracy and peace of mind.
📩 Email us at info@akifcpa.com to get started.