What is a Profit and Loss Statement?

A Profit and Loss Statement is commonly referred to as a P&L Statement. It is one of the most important financial records you can have (or should have). It’s a monthly recording of all income and expense transactions, giving you direction and trends for your business. At the bottom is the amount of profit or loss for a particular month. That’s why people often refer to the “bottom line” as to how your business is doing.

Typically, the income or various revenues for the business are listed at the top. The Cost of Goods Sold is usually subtracted from the gross sales to give you net sales.

After the income or revenue, the business expenses are listed and subtracted from the net sales. These expenses list all of your operating expenses, from office supplies to repairs. Payroll, taxes, and insurance are also subtracted. Then appreciation is deducted. The result is your profit or loss (bottom line).

Most software programs can print your P&L at the end of the day on the last day of the month. You can compose a P&L by hand, but it can be very time-consuming, increasing the chance of error. If you can’t print your own P&L, have your Bookkeeper or Accountant provide it for you.

At the end of your fiscal year, you can print a “year-end” P&L showing whether your company made or lost money. P&Ls are critical in forecasting the next year’s income statements.

For more information or a sample P&L, feel free to reach out.