When choosing a profit and loss statement scheme, you should consider whether you want to classify operating expenses by their nature or by functionality.
- In Scheme 1 of the profit and loss statement, operating expenses are classified by their nature (e.g., material costs, labor costs). Scheme 1 is generally easier to apply because it does not require allocating costs to different functions within the company.
- In Scheme 2 of the profit and loss statement, operating expenses are classified based on their function within the company (e.g., cost of goods sold, marketing expenses). Scheme 2 is generally more complex to apply because it requires determining which company function each operating expense is associated with. Certain costs (e.g., labor costs) must be proportionally distributed across different functions. This scheme is more commonly used by manufacturing companies.
You can change the scheme in the report settings: Accounting -> Profit and Loss Statement -> Actions -> View Report Settings -> Actions -> Change the scheme of the Report.
You can also see which profit and loss statement scheme is currently in use from the report scheme change view.
Accounting -> Profit and Loss Statement -> Actions -> View Report Settings
To change the scheme, select “Change the scheme of the Report” under the Actions button.
Here you can see that Scheme 1 of the profit and loss statement is currently in use, but Scheme 2 can also be selected. To do so, check the circle in front of the text.
If you have made changes to the report settings but find that you need to restore the previous situation, you can select “Restore Previous Report Settings” from the Actions button.
If it seems that restoring previous settings doesn’t help, you can also restore the report’s default settings. The “Restore Report Default Settings” option means that the profit and loss statement settings will be updated to the current default settings. If you choose this option and have previously added accounts and included them in the report, you should check if the accounts are still present and correctly placed.
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