A profit and loss statement provides insight into a company's performance over a given period of time. It details the company’s total revenue as well as all expenses it had during the period.
Not all organizations use a profit and loss statement to keep track of their net income over a period of time. In the case of non-profits, a statement of activities is utilized instead. Publicly traded companies generally issue profit and loss statements on a quarterly basis.
What’s included in a profit and loss statement?
Profit and loss statements generally contain a number of unique sections that describe different facets of a business's overall performance. These include:
Sales — All of the money that a business accrued by way of its various operations forms part of the overall sales number. This section simply details the business’s gross revenue, without subtracting expenses of any kind.
Cost of Sales — This section specifies how much capital was used to create a product or provide a service.
Selling, General, and Administrative Expense - All expenditures directly or indirectly tied to sales fall under this definition. It also includes all other costs not directly related to product development.
Marketing — This section details all the company’s marketing and advertising expenses. It includes the costs accrued to promote the business.
Research and Development — The R&D section in a profit and loss statement normally includes the capital expended in the pursuit of new product ideas.
Interest Expense — When businesses leverage debt to finance operations and asset acquisition efforts, they take on an added expense that belongs in this section.
Taxes — Taxes of all types faced by a given company must appear in this part of its profit loss statement.
Net Income — After subtracting all expenses from gross revenue, the resultant figure goes in this section. A company's net income is the amount of money it actually made as profit over a given period of time.
A profit and loss statement provides an overview of a company’s finances over a given accounting period, such as a quarter or year. It provides details beyond the company’s gross revenue or net profit, detailing expenses such as marketing and research and development.