What is a profit & Loss Statement?

A profit and loss statement simply known as a P & L account or income statement is one among the financial statements which provides the company’s revenue, expenses, profit & loss over a period of time. 

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:

  1. Gross Loss (Transferred from Trading Account)
  2. All Indirect Expenses

On the credit side:

  1. Gross Profit (Transferred from Trading Account)
  2. All Indirect Revenues

What components include the P&L Statement?


  1. Revenue or Sales
  2. Cost of goods sold
  3. Gross profit
  4. Selling, General and Administrative Expenses
  5. Depreciation
  6. Interest income/expenses
  7. Taxes
  8. Net profit/income

How to prepare 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.

    1. Prepare ledger accounts: With the help of a journal book, prepare a statement to get the ledger closing balance.
    2. Create trial balance: Trial balance gives the lists of all ledger accounts with closing balance from individual ledger.
  • Preparing profit and loss statement: All ledger accounts having a nature of purchase, sales, direct expense and income, indirect expenses and income are posted to p  and l statements.

 What is the Format of Profit & Loss Account?

To Opening StockxxxBy Salesxxx
To PurchasesxxxBy Closing Stockxxx
To Direct Expensesxxx
To Gross Profitxxx
To Operating ExpensesxxxBy Gross Profitxxx
To Operating Profitxxx
To Non-operating expensesxxxBy Operating Profitxxx
To Exceptional ItemsxxxBy Other Incomexxx
To Finance Costxxx
To Depreciationxxx
To Net Profit Before Taxxxx

Using Finline you can create the profit and loss statement of the firm easily. Finline ask only the basic unit details of the business and based on the input the software automatically creates the P&L in a perfect manner. Finline is mostly helpful for entrepreneurs who are not having enough knowledge in finance . Create project report using finline easily