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Profit & Loss Statement

Beginner
10 min

What is Profit & Loss Statement?

A Profit & Loss (P&L) Statement shows company performance over a period, tracking revenues, costs, and expenses.

Key Components:

  • Shows revenues and expenses
  • Calculates profit/loss
  • Monthly, quarterly, annual
  • Key for decision making

Why it matters

Measure Profitability

Know if business is making money

Identify Costs

See where money is spent

Track Trends

Compare over time

Make Decisions

Guide business choices

Key Concepts

Revenue

Money from sales

Example: ₹500,000...

COGS

Cost of goods sold

Example: ₹200,000...

Gross Profit

Revenue - COGS

Example: ₹300,000...

Net Profit

Profit after ALL expenses

Example: ₹150,000...

How to use

1

List revenue

Total all income

2

Calculate COGS

Direct costs

3

Get Gross Profit

Revenue - COGS

4

List expenses

Operating costs

5

Calculate Net Profit

Gross Profit - Expenses

Example

Goal: Calculate net profit
Revenue: ₹500,000
COGS: ₹200,000
Gross Profit: ₹300,000
Expenses: ₹150,000
Net Profit: ₹150,000
Result: Net profit of ₹150,000

Pro Tips

  • •Compare month-over-month: Track trends
  • •Calculate margins: Profit/Revenue
  • •Watch changes: Investigate unusual fluctuations

Practice

Calculate gross profit margin and net profit margin for a retail store
Next: Balance Sheet