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 & loss statement?

The profit and loss account shows the revenue and losses of a business over a given period of time

View the profit & loss statement for your business with just a click in Debitoor accounting and invoicing software. Try it free.

The profit and loss account shows what net profit and loss your business has made within an accounting period after deducting all expenditure from the income. A net profit is earned if the total expenditure is less than the sales and a net loss if it is greater.

The profit & loss statement is considered one of the most important documents for keeping an eye on the financial health of a business. It is also sometimes referred to as the ‘income statement’.

For all private limited comanpies, the profit and loss statement is part of annual statutory accounts.

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. The data gathered for these two reports and the resulting calculations that can be made provide useful information for the owners and managers of a business.

The profit & loss report, balance sheet, and other reports illustrate how well a business is operating, whether there are any places where spending can be improved, and whether a company has been consistent in its earnings.

When to use a P&L

Typically, a profit & loss statement is created at the end of accounting periods - for example, at the end of each quarter. This allows a business to stay on top of their financial situation and make adjustments for the coming quarter.

What does (not) appear on a P&L statement

To calculate the net income, also known as the profit, the general costs of running the business are subtracted from the revenues. These costs include:

By removing these amounts in the calculations, the profit and loss statement provides a business with a cleaner, clearer understanding of their revenues and losses.

P&L statement and Debitoor

In the larger Debitoor plans, you have access to your company’s profit & loss report at any time. It is possible to generate it with just a click. You can also set certain parameters such as the date range, whether to include previous periods, and more.

You also have the same quick access to your balance sheet and VAT report, helping you stay on top of your business finances.