Profit and Loss Statement (P&L)

Profit and Loss Statement (P&L)

A Profit and Loss Statement (P&L), also known as an income statement, is a financial report that summarizes the revenues, costs, and expenses incurred during a specific period, usually a fiscal quarter or year.

It provides information on a company’s ability to generate profit by subtracting the total expenses from total revenues. The resulting figure indicates either a net profit (if revenues exceed expenses) or a net loss (if expenses exceed revenues).

For example, a P&L statement might show the following:

• Total Revenues: $500,000
• Cost of Goods Sold: $300,000
• Gross Profit: $200,000 (Total Revenues – Cost of Goods Sold)
• Operating Expenses: $150,000
• Net Profit: $50,000 (Gross Profit – Operating Expenses)

This statement is essential for stakeholders to assess the financial performance of a business and make informed decisions.