The Income Statement or Profit and Loss Statement, sometimes known as the “P&L”, is the report that totals up all the Revenue you’ve earned and all the Expenses you’ve incurred during a certain period. The Profit and Loss and the Balance Sheet make up what most people refer to as your “Financial Statements”. (There’s this other report called the Statement of Cash Flows, but that thing even confuses me, and I purportedly know what I’m doing. So we’re going to table it for much later. ☺)
Here are the pieces of the Profit and Loss Statment:
Revenue – Total of all the Sales you’ve made.
Cost of Goods Sold – What you paid for what you sold.
Expenses – What you paid for everything else.
Net Income – How much money you made after you paid all the bills.
And that’s really all there is to the Profit and Loss Statement. It tells you exactly what is says: How much Profit and/or Loss your company made during a given period of time.
It gives you the total of all the Sales you’ve made, Revenue, and the total of all the bills you’ve paid, Expenses and tells you how much is left, Net Income. Voilá!
The real usefulness of this report is what it tells you and what you can do with it. Once you have a reconciled P&L you can use it to keep an eye on your Gross Margin (Which is Sales – Cost of Goods Sold, don’t be scared, you’re gonna love it), you can use it to create a Budget, a forecast, and all kinds of other fun things!
No, really, FUN things. I’m serious. Why? Because like I keep saying, if you Don’t Know Where Your Money Is, YOU DON’T KNOW WHERE YOUR MONEY IS! This report (and the Balance Sheet) tells you that, and more.
Next up – a more detailed look at the pieces and parts of the Balance Sheet and Income Statement. You’re gonna love it!
Profit and Loss Sample for Blog
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