A profit and loss statement or P&L statement simply shows the result of the entity( proprietorship, LLP, Pvt Limited, etc.) during the period. In some countries, it’s not a profit and loss statement, it’s an income statement and in some, an income and expenditure statement.
Furthermore, this actually shows the income and expenses. In simple mathematical calculation Revenue-Expenses=Profit. We can find any company’s P&L statement on some financial websites. Similarly, we can find lots of simplified structures of this statement from several sources.
But, from this statement, we generally calculate net profit. The main three things which we generally analyze when we take or make any decision
Income and revenue
In the fixed period when we are calculating the income statement at that period, we gain some economic benefits. That is income. Income comes from various sources. From operations, sales, selling assets, bonds, and shares we gain some money. Similarly, decreasing some liabilities also income. Several parts are involved in gaining these economic benefits. Furthermore, these all are together is total revenue. From this revenue, we collect profits which we further utilize in several operational and financial sectors to collect more.
Expenses
Expenses are the decrease in the economy. During the period, specifically the fixed accounting period, some money goes or spends in the form of outflows. The most important part is some expenses are fixed but some are not. In this part wages, DA, appraisals, materials cost, stock purchasing cost, benefits of the employees, etc. are there. When we generally analyze the income statement or especially the profit and loss statement, we always see these costs. Furthermore, a most important point we look that, we don’t cut the appropriate costs. We always cut down the excess cost.
Profit and Loss
Profit is total revenue minus total cost. the loss is if the value is negative. In this statement, there are several types of profits we usually measure. These profits are profits before exceptional items, before operations, after discounting operations, before the taxes, etc. Similarly, if after these calculations profits are negative then we are having losses.
Taxes
Taxes obviously are different according to the product and services. Some have different rules and some have different foundations. In the income statement, we first see the profits before the taxes. After that, we see the income and profits after the taxes. Each and every part of the entire process and structure we analyze, before and after paying taxes. After that, we come to a decision.
One response
Good post. I learn something new and challenging on sites I stumbleupon everyday. Its always interesting to read articles from other authors and practice something from other sites.