Profit and Loss Statement

What Is a Profit and Loss Statement?

A profit and loss statement (P&L) also known as income statement, is a financial statement that reports a company's revenues and expenses over a specific period of time, usually a month, quarter, or year. The income statement provides a summary of a company's financial performance during the period covered, showing how much revenue was generated and how much expenses were incurred in generating that revenue.

What Is in a Profit and Loss Statement?

The key components of a profit and loss statement:

Revenue: It is the total amount of money earned by the company from sales, services, and other sources of income during the accounting period. Cost of goods sold: It is the direct cost associated with producing and delivering the goods or services sold by the company. This includes materials, labor, and overhead costs.

Gross profit: It is the difference between the revenue and the cost of goods sold. This represents the profit earned from the sale of goods or services before deducting the operating expenses.

Operating expenses: It is the indirect costs associated with running the business, such as salaries and wages, rent, utilities, supplies, depreciation, interest, and taxes.

Operating income: It is the difference between the gross profit and the operating expenses. This represents the profit or loss generated by the company's normal business operations.

Non-operating items: Any gains or losses from non-operating activities, such as the sale of assets or investments falls under non-operating items.

Income before taxes: It is the sum of the operating income and the non-operating items, before deducting the income tax expense.

Income tax expense: It is the amount of taxes owed by the company based on its taxable income.

Net income or loss: It is the final figure after deducting the income tax expense from the income before taxes.

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