What is a Profit and Loss Statement?
A Profit and Loss Statement (P&L) is a financial statement that shows
the revenues, expenses, and profit or loss of a business during a specific period.
It helps business owners and investors evaluate business performance.
Main Formula
-
Profit = Revenue − Expenses
-
Net Profit = Gross Profit − Operating Expenses
Elements of Profit and Loss Statement
1. Revenue
- Sales Revenue
- Service Revenue
- Other Income
2. Cost of Sales
- Opening Inventory
- Purchases
- Direct Costs
- Closing Inventory
3. Expenses
- Salaries
- Rent
- Transport
- Utilities
- Depreciation
- Advertising
Profit and Loss Example
| Description |
Amount (Frw) |
| Sales Revenue |
20,000,000 |
| Cost of Sales |
8,000,000 |
| Gross Profit |
12,000,000 |
| Operating Expenses |
4,000,000 |
| Net Profit |
8,000,000 |
Important Terms
- Revenue – Income earned from business activities.
- Sales – Money received from selling goods or services.
- Cost of Sales – Direct costs of producing goods sold.
- Gross Profit – Revenue minus Cost of Sales.
- Operating Expenses – Day-to-day business expenses.
- Net Profit – Final profit after all expenses.
- Loss – When expenses exceed revenue.
Read Profit and Loss Notes
Interview Questions
- What is a Profit and Loss Statement?
- What is Revenue?
- What is Gross Profit?
- What is Net Profit?
- What is the difference between Profit and Loss?
- Why is a Profit and Loss Statement important?
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