Many people get confused with the profit and loss of the company. If companies are in a partnership firm then the company’s profit and loss account contain both Profits under income and loss under expenses.
Statement of profit and loss account contains both profit and loss generated by the Company, firm, or institution. It has been conventionally named as a profit and loss account. It provides the fiscal report that sums up the incomes, expenses, and costs caused during a predefined period.
This article will help you to know about the P&L statements, why these are important, and how you can get the statements.
What is Profit and Loss Statement?
A profit and Loss Statement is a statement of earnings and the expense incurred in business. It tells about the Overconsumption of Income over expenditure that makes Profit and reverse are Loss.
It is a statement of expense record that represents the activities of the company in a particular period. It helps to represent where the company spent more and where it needs to spend less. It also analyzes the record of what the company has earned in a period or what it has lost in the period in terms of profit and loss.
In this way, management gets the analysis of the record and knows if it needs to reduce the operating or administrate the expense to find the net profit.
A profit and loss statement is a summary of all the general ledger accounts which relate to either revenue or expenses.
The items on P&L Statements are in various forms depending on the context. The statement for internal management purposes is more detailed than the general public statement.
The fundamental skeleton of the P&L would look like the following-
- Cost of Sales
- Gross Margin
- Non-Operating Expenses/(Income)
- Pretax Income
- Provision for Income Taxes
- Net Earnings/(Loss)
- Operating Expenses
- Earnings from Operations
The Need of Profit and Loss Statement
Dissecting the P&L statements, It assists the business with setting up the business expense form. Business tax return utilizes the information through the P&L as the basis when it comes to calculating the net income and determining the income tax your company needs to pay.
Depending upon the need P&L statement can be used in two types which are needed in business–
- Business needs to review the profit and loss periodically to see the monetary status. They need it almost in every quarter. Reviewing the Profit and Loss helps to prepare the tax returns of the business. P &L gives information on every expense which helps calculate the net income and results in the amount your business needs to pay as a tax.
- A new business or startup needs P&L statements to know the profit and loss of the business. This helps to know the overall expenses for the future. It is important for the new business projects as it helps to analyze the expenses.
Where Can You Get Profit and Loss statement?
You can get P&L statements on the company’s website. It is the financial statement that is required by the companies and the business to issue by Law to shareholders. The P&Ls for different periods should always be looked at with the cash flow statement. It provides an accurate image of the company’s financial health.
The profit and loss (P&L) statement helps to analyze the Profit, Loss, and expenses of a specified period in the business. This statement plays important role in the business as it provides information about a business’s ability or inability to create profit by increasing revenue, reducing costs, or both.