Intermediate
The Profit & Loss statement
What you earned, what you spent, and what is left.
The Profit & Loss statement
The P&L (also called the income statement) answers one question: did your business make money over a period of time? It lists what you earned and what you spent, and the difference is your profit or loss.
The three big numbers
- Revenue (sales) — money earned from customers
- Expenses — the costs of running the business
- Net profit — what is left after expenses
Between revenue and net profit sit two useful lines. Cost of goods sold (COGS) is the direct cost of what you sold; revenue minus COGS is your gross profit. Operating expenses such as rent, salaries and marketing are then subtracted to reach net profit.
Gross profit tells you if your product is priced well. Net profit tells you if the whole business is sustainable.
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