Profit and Loss Statement
Short answer
A profit and loss statement (also called a P&L or income statement) summarizes a business's income and expenses over a period of time and shows whether the business made a profit or took a loss.
Why it matters
The P&L is the report most owners look at to understand whether the business is actually making money. It connects revenue to the costs that produced it, which a bank balance alone cannot do.
How it works
Income is totaled, expenses are totaled, and the difference is net income (profit) or a net loss. The report is usually produced monthly, quarterly, and annually so trends become visible over time.
A simple example
A business earns $18,000 in revenue in a month and spends $12,500 across rent, wages, supplies, and software. The P&L shows $5,500 in net income for that month.
A common misunderstanding
A positive P&L does not always mean cash is available. Profit and cash flow are different — a business can be profitable on paper while still waiting on unpaid customer invoices.
Related terms
Related service
Monthly Bookkeeping
When you may want help
If you do not receive regular P&L statements or cannot tell whether your business is profitable month to month, monthly bookkeeping produces these reports as part of the routine.
Written and reviewed by Rachel Armstrong, owner and bookkeeper at Armstrong Quality Financial Services. QuickBooks Online Level 1 ProAdvisor. This entry explains a general concept and is not individualized tax, legal, or investment advice.
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