Profit & Loss Statement – What is a profit and loss statement?
Definition: Simply put, the Profit and Loss Account shows the profit or loss of a business over a given period of time.
The Profit and Loss account shows what net profit or loss your business has made within an accounting period after deducting all expenditure from income. A net profit is earned if total expenditure is less than the sales and a net loss if it is greater.
Measurement of success
An essential objective of a business is to make a profit. The P&L statement shows the extent to which it has been successful in achieving this objective.
Companies are expected to keep their P&L statements in certain formats. Typically the P&L statement will show the revenues received by a business and the costs involved in generating that revenue. In simple terms:
Revenues - Costs = Profits
In addition to the Profit and Loss statement the Balance Sheet is an important financial statement for a business.