Profit and Loss Statement

What is a profit and loss statement?

A profit and loss statement (P&L), also called an income statement, shows your business's revenue, expenses, and profit over a specific period—usually a month, quarter, or year. It answers the fundamental question: Did we make money?

The P&L is one of the three essential financial statements every business should review regularly.

P&L structure

A basic profit and loss statement includes:

• Revenue — Total money earned from sales and services
• Cost of goods sold — Direct costs of delivering services/products
• Gross profit — Revenue minus COGS
• Operating expenses — Overhead costs (rent, utilities, insurance)
• Operating income — Gross profit minus operating expenses
• Net profit — The bottom line after all expenses and taxes

Using your P&L

Review your P&L monthly to spot trends. Is revenue growing? Are expenses creeping up? Is profit improving? Compare periods to see what's changing. A P&L that shows consistent losses indicates problems that need addressing; consistent profits mean your business model is working.