What is a profit and loss statement?
A profit and loss statement is a financial report which summarises a company’s revenues, costs, and expenses over a specific period. It shows whether the business has made a profit or a loss.
Why is a profit and loss statement important?
It provides a clear view of financial performance. Business owners and investors use it to assess profitability, control costs, and make strategic decisions.
What does a profit and loss statement include?
It includes revenue, cost of goods sold, gross profit, operating expenses, operating profit, and net profit. It may also include detailed breakdowns of income and expenses.
How often is a profit and loss statement prepared?
Businesses typically prepare it monthly, quarterly, and annually. Regular preparation allows ongoing performance monitoring.
What is the difference between profit and loss statement and balance sheet?
The profit and loss statement shows performance over a period, while the balance sheet shows financial position at a specific point in time.