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What is a Profit and Loss (P&L) Statement?

The term profit and loss (P&L) statement refers to a financial statement that summarizes the revenues costs, and expenses incurred during a specified period, usually a quarter or fiscal year.

P&L statements are also referred to as a(n):

  • statement of profit and loss

  • statement of operations

  • statement of financial results or income

  • earnings statement

  • expense statement

  • income statement

There are three main sections of a P&L statement:

  1. Revenues

  2. Expenditures

  3. Bottom line

P&L is the most popular and common financial statement in a business as it quickly shows the actual information about net profit/ loss generated by a business. Here are the benefits of P&L report:

  1. It helps to address the operational efficiency of the company as your Direct/indirect expenses and Direct/indirect incomes are the part of P&L accountant.

  2. Profit and loss report helps in making control over indirect expenses by providing important information about these expenses.

  3. It helps you analyze how much tax you should pay for the profits you made.

  4. Helps to track business performance which can be compared also to previous financial periods of time to track improvement in the business.

  5. Best indicator of your business health

  6. Helps to make future decisions, make plans and perform better

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