Profit and Loss Statement (P&L)

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 17, 2022

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.

Profit and Loss Statement (P&L) FAQs

What does P&L stand for?

P&L referrs to a profit and loss statement in accounting.

What is a Profit and Loss Statement?

A profit and loss statement, also called an income statement or P&L statement, is a financial document that summarizes the revenues, costs, and expenses incurred by a company during a specified period.

What is the purpose of a Profit and Loss 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.

How should P&L statements be viewed?

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.

What are the three core documents that measure a company's performance?

Along with the balance sheet and statement of cash flows, the P&L is one of the three core financial documents that measure company performance.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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