What is a P&L (Profit and Loss Statement)?
Profit and Loss Statement (P&L) Definition
A profit and loss statement, also called an income statement or P&L statement, is a financial document that summarized the revenues, costs, and expenses incurred by a company during a specified period.
Usually this is one fiscal quarter or fiscal year.
It begins with an entry declaring overall revenue, also called the top line, and contains expense entries subtracting costs of doing business including the cost of goods sold, operating expenses, tax expenses, and interest expenses.
The last item, known as the bottom line, shows the remainder as net income, or profit.
The Purpose of a P&L Statement
The purpose of a P&L statement is to provide information about a company’s overall ability to generate profit, either by increasing revenue or decreasing costs, or both.
Along with the balance sheet and statement of cash flows, it is one of the three core financial documents that measure company performance.
P&L Statement Example
When evaluating a profit and loss statement, it is important to consider statements from previous periods to get a more accurate sense of the rate of change in a company’s revenues and expenses.
For example, if a company’s expenses are increasing faster than its revenue over several fiscal years, it could indicate a looming problem.