Profit And Loss Statement

What Is A Profit And Loss Statement?

A profit and loss statement is a financial report that details a company’s revenue and expenses over a given period.

A profit and loss statement is a financial report that summarizes the revenue a company generated and expenses it incurred during a specified period, usually a quarter or fiscal year. The report shows a company’s ability or inability to generate sales and manage costs.

Deeper Definition

The profit and loss statement serves as a means for managers and investors to evaluate the business’ performance over a given period. The report shows whether the company made money or lost money during the period in view.

Another name for the profit and loss statement is “income statement.” It is the most popular financial statement every public company release on a quarterly and annual basis. By looking at the income statement of a business over a fiscal year, investors determine its past financial performance and make future projections.

For a business to prepare a profit and loss statement, it may do the following:

Calculate revenue: Revenue is the total amount of income generated by the sale of goods and services.

Calculate cost: Cost is the amount of money used to manufacture something or deliver a service.

Calculate operating expenses: Operating expenses are the amount of money it costs a business to keep running, such as staff wages, transportation, and office supplies.

Calculate taxes: Taxes are compulsory financial charges levied by the government.

Subtract various costs from revenue: To determine the gross profit or loss, it only needs to subtract the cost of sold goods, taxes, and operational expenses from the generated income.