Click on the links below to learn more

A Profit and Loss Statement (also known as an Income Statement or a Statement of Financial Performance), communicates the profitability of your business in a particular financial period. The profit and loss statement consists of three main elements:

• Income: Represents all inflows of economic benefits into your business. It consists of revenue and gains. Revenue is the inflows that result from general business activities and investments, such as sales or interest received. Gains are inflows that result from the sale of business assets.

• Cost of Goods Sold: The total cost of inventory that is sold during the period.

• Expenses: Effectively, this is all business outgoings incurred during the period, other than the distribution of income or assets to the owners of the business. Examples include sales and distribution expenses, business administration expenses, and financing expenses such as interest paid to business creditors.

In brief, the profit and loss statement is calculated as follows:

Net profit = (Revenue - COGS) Gains - Expenses

If income exceeds expenses the business will have made a profit.  On the other hand, if expenses exceed income, the business would have suffered a loss for the period.

To assist you in developing your profit and loss statements, you can download the following sample templates:

• 12 month profit and loss statement
• 5 year profit and loss statement