What Is a Profit and Loss (P&L) Statement?

A profit and loss statement (P&L), also called an income statement, shows your revenue, your expenses, and the profit or loss left over across a period of time — a month, quarter, or year.

The structure flows top to bottom: Revenue − Cost of Goods Sold = Gross Profit, then Gross Profit − Operating Expenses = Net Income. Reading it in that order tells you two different stories — how well your product or service performs, and how well the whole company is run.

The line that owners watch: gross margin (gross profit as a percentage of revenue) shows whether your core pricing and costs are healthy, before overhead. A gross margin that drifts down two points month after month is a quiet profit leak that the bottom-line number alone can hide.

Why it matters: the P&L is the report you should read every month. It answers 'did I make money, and where did it go?' — and comparing this month to the same month last year strips out seasonality so you see the real trend. It pairs with the balance sheet (position) and the cash flow statement (cash movement).

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Profit and Loss Statement FAQ

What is a profit and loss statement?

A profit and loss statement (P&L), or income statement, is a financial report showing your revenue, expenses, and resulting profit or loss over a set period. It answers whether the business made money and where the money went.

Is a P&L the same as an income statement?

Yes. 'Profit and loss statement,' 'P&L,' and 'income statement' are three names for the same report: revenue minus expenses over a period, ending in net profit or net loss.

Part of the Tides Bookkeeping Glossary — and the complete guide to small business bookkeeping.

What Is Profit and Loss Statement?

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Profit and Loss Statement FAQ