Debitoor Dictionary

Accounting terms explained in a simple way

Over 150 Articles for Founders and Entrepreneurs

  1. Balance Sheet
  2. Expense
  3. Gains
  4. Impairment
  5. Losses
  6. Revenues
  7. Sales turnover
  8. Statement of Cash Flows

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.