A profit and loss statement shows the business’s income and expenses during a period. This reporting period could be a month, quarter or financial year. It is also known as an income statement and can be shortened to a P& L statement.
The profit and loss statement provides information on a business’s ability to generate profits from their total revenue and is measured in various stages from Gross Profit through to Net Profit.
Gross profit is the amount left over from revenue after deducting direct costs and expenses. You may often see the term EBIT for these reports and it means Earnings Before Interest and Tax.
Net profit is gross profit less all operating expenses, depreciation, interest and taxes. For this you may see EBITDA
Net profit becomes retained earnings on the balance sheet.
Be Aware of the Ebbs and Flows of Your Business: Multi-Period Profit and Loss Reporting Nearly every business has its…