Accounting terms

Dictionary of all accounting terms

What is a Profit and Loss Statement?

A Profit and Loss Statement, one of the four most important financial documents, lists the expenses, costs and revenues that a business incurs for a specified period of time.

The profit and loss statement (P&L) is also known as an 'income statement,' 'income and expense statement,' 'statement of operations,' or 'statement of financial results.'

It is one of the four important financial documents, the others being the balance sheet, cash flow statement and statement of owner's (shareholder's) equity. The profit and loss statement is calculated for a specific period of time to help summarize the expenses, costs and revenues for a business. That time period is normally a fiscal quarter or year.

The profit and loss statement is normally calculated alongside the balance sheet and cash flow statement. Together, they provide an accurate overview of a company's finances.

Profit and loss statements are normally compared over different accounting periods. This helps the business owner and stakeholders see changes in operating costs, revenues, and net earnings over time, helping to display a trend better than only looking at the numbers themselves.

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