A profit and loss statement simply known as a P & L account or income statement is one among the financial statements which provide the company’s revenue, expenses, profit & loss over some time.
The P&L statement will help the investors and creditors to determine the past performance of the company. With the help of a profit & loss statement in a project report, we can predict the company’s sales, expenses, and cash inflows.
What is the Structure of Profit & Loss Statement?
The following items usually appear on the debit and credit side of a P & L Account.
On the debit side:
- Gross Loss (Transferred from Trading Account)
- All Indirect Expenses
On the credit side:
- Gross Profit (Transferred from Trading Account)
- All Indirect Revenues
What components include the P&L Statement?
- Revenue or Sales
- Cost of goods sold
- Gross profit
- Selling, General, and Administrative Expenses
- Depreciation
- Interest income/expenses
- Taxes
- Net profit/income
How to prepare a Profit and Loss Statement?
To prepare this statement you need to prepare another statement and collect data to make this statement. Follow the steps to prepare the statement.
- Prepare ledger accounts: With the help of a journal book, prepare a statement to get the ledger closing balance.
- Create trial balance: Trial balance gives the lists of all ledger accounts with the closing balance from the individual ledger.
- Preparing profit and loss statement: All ledger accounts having the nature of the purchase, sales, direct expense and income, indirect expenses, and income are posted to P&L statements.
What is the Format of Profit & Loss Account?
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Opening Stock | xxx | By sales | xxx |
| To Purchases | xxx | By Closing stock | xxx |
| To Direct Expenses | xxx | ||
| To Gross Profit | xxx | ||
| xxx | xxx | ||
| To Operating Expenses | xxx | By Gross Profit | xxx |
| To Operating Profit | xxx | ||
| xxx | xxx | ||
| To Non-operating expenses | xxx | By Operating Profit | xxx |
| To Exceptional Items | xxx | By Operating Profit | xxx |
| To Finance Cost | xxx | ||
| To Depreciation | xxx | ||
| To Net Profit Before Tax | xxx | ||
| xxx | xxx |
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