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

Definition : Also known as Income statement, is a financial statement which shows expenses and revenue of a company during a particular period, usually a fiscal quarter or year.

Income Statement helps to convey the status of a company i.e. Company is making profit or suffering losses. It is very important to read Income Statement of a company before investing, both of recent and past years.

Note :
Revenue : Total amount received from sales of goods and services.
Expenses : Total amount spend in producing final product or service.

Structure of P&L Statement 

Income Statement is divided into Five main section - Net sales, Cost of Goods Sold, Gross Margin, Operating Expenses and Net Profit Before & After Income Tax (Or Net Loss in case of Loss).

  • Net Sales : It is the sum of Gross sales excluding its returns, allowances and discounts.
  • Cost Of Goods Sold : Amount of money used to produce the final product. For example cost of inventory, merchandise purchased, freight, etc.
  • Gross Margin :  Net sales - Cost of Goods Sold
  • Operating Expenses : Expenses a business incurs through its normal business operations. For example Salaries, rent, light, depreciation, repairs, etc.
  • Net Profit : Profitability of a company after excluding all costs and taxes.


P&L Statement Of a Company(Quarterly)

Difference between Balance Sheet and Income Statement

  • Balance Sheet reveals financial situation for specific point of time, where as, Income Statement reveals financial situation for a period of time.
  • Balance Sheet consist of company's assets and liabilities, where as, Income statement consist of company's revenue and expenses.
  • Balance sheet possess both long-term and short-term details of a company, where as, Income statement possess only short-term details (quarter or year).


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