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1. Shard Calculation

Query:

Response:

Calculated Shard: 126 (from laksa044)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa126.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/\')), getAhrefsUnparsedNoserviceFromURL(\'https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/","crawl_time":1775036938,"first_indexed_time":1681308080,"http_code":200,"src_unparsed":"com,intuit!quickbooks,\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/ s443","src_root_hash":"7048075208169300526","history_drop_reason":null,"meta_title":"What actually is a profit and loss statement + FREE template | QuickBooks","meta_descriptions":["A profit and loss (P&L) statement is a financial statement that shows a company’s revenues and expenses for a period. Learn how it works with a free template."],"attrs_boilerpipe_text":"Bookkeeping\nWhat is a profit and loss (P&L) statement: Definition, examples, and template\nPublished on April 30, 2025\nA profit and loss statement is a financial statement that shows a company’s revenue and expenses for a given period of time. You can create a simple profit and loss statement by using a template and entering your business’s information.\nA\nprofit and loss (P&L) statement\nis the same as an\nincome statement\n. It’s a financial document that includes a company’s revenues and expenses. Business owners use the P&L to understand how much money a company makes, which they can also quickly and easily do with accounting software. \nKnowing how to read a profit and loss sheet is key to making informed business decisions. It shows you where you might be able to cut costs. Let’s look at exactly what a P&L is and why it’s important, and get a free profit and loss statement template to simplify your process.\nWhat is the format of a profit & loss (P&L) statement?\nHow to do a profit and loss statement\nHow to read a P&L statement\nExample of a profit and loss statement\nSpend more time growing your business\nConsider creating a quarterly profit and loss statement. This will help you see where your business stands throughout the year so you can adjust your strategies as needed.\nWhat is the format of a profit & loss (P&L) statement?\nA profit and loss statement (P&L) is a snapshot of a company's sales and expenses over a period of time. It shows company revenues, expenses, and net income over that period. The bottom line on a P&L is net income, also known as profit or loss. \nThe profit and loss formula is: \nRevenue - Expenses = Profit or loss\nThere are many ways to format a P&L statement, but all versions include the same basic information. Sales are at the top of the statement, while expenses appear below. The profit or loss is the difference between the two.\nLet’s take a closer look at the main components of a profit and loss statement.\nRevenue\nRevenue is the money your business makes from selling goods or services. It’s the very first line on the profit and loss statement. Note there are two types of revenue: \nGross revenue\n, or total revenue or sales, is the total amount you make before accounting for discounts, returns, or expenses.\nNet revenue\n, also known as net sales, is the money you make after deducting discounts and returns. \nNote that net revenue is gross revenue minus discounts and returns.\nExpenses\nThe expenses of a business include all the costs to generate revenue. \nCost of goods sold (COGS)\nis the cost of materials and labor a company uses to make a product or service. It’s also known as the cost of sales. The costs can include raw materials or direct wages for employees. But also certain overhead costs, such as utilities. \nCOGS are expenses that show up on the top part of the P&L before gross profit.\nGross profit\nis the money you make from sales after subtracting your cost of goods sold, using the formula: \nGross profit = Net revenue - Cost of goods sold\nOther expenses can be operating or non-operating. \nOperating expenses\nare the costs of running your business. While COGS are for making a product, operating expenses are the costs to support that process. Operating expenses include:\nRent\nMarketing costs\nSalaries for admin staff\nDepreciation\nLicensing fees\nNon-operating expenses\nare costs not part of your core operations. These include taxes, fines, legal fees, and interest. Non-operating expenses include anything unlikely to happen again. For example, losses due to shutting down a business operation.\nRun your business with confidence\nGet help and guidance when you need it from real QuickBooks experts.*\nIncome\nIncome is how much money you make in your business. There are two key types of income—operating and\nnet income\n. \nOperating income\nis a business's income from its core operations. It excludes non-operating expenses, such as taxes or interest expenses. This type of income measures how well a company generates money from its main business. The formula for operating income is:\nOperating income = Gross profit - Operating expenses\nNet income\nis your bottom line—the last item on your P&L. It's the money left after subtracting all expenses.\nNet income = revenue - COGS - Operating expenses - Non-operating expenses\nNet income comes after both operating and non-operating expenses on the P&L. It’s a measure of the money left over for shareholders or owners.\nHow to do a profit and loss statement\nThe P&L will include three key components—revenue, expenses, and income. These components help you understand where your business is doing well, where you may be able to cut costs, and how much you’re earning after covering those expenses. \nThough you can put a profit and loss statement together from scratch, using a profit and loss statement template is far easier. For example, our template includes space for the three components and helps you organize your information in a usable way.\nLet’s look at how you can use the template to create a functional profit and loss statement for your business.\n1. Start with revenue\nDetermine what period you want to create a profit and loss statement for. This can be any period, but it’s generally best practice to put together a P&L monthly to help identify trends. \nYou’ll want to calculate your gross revenue ‌for that period and list it on the top line of your P&L statement.\n2. Calculate your costs\nAfter accounting for all your revenues, group your expenses into one of three categories: \nCost of goods sold (COGS)\nOperating expenses\nNon-operating expenses\nCOGS are all the costs of making a product\n. For a service business that doesn’t make a physical product, COGS can include labor for employees performing the service. For example, a hair stylist’s COGS would include the time spent styling hair.\nYou'll group all the other business costs as operating expenses. Non-operating expenses should be everything that's left. This will be the money you spend on things like taxes and interest.\nFor example, a hairstylist would have operating expenses like cosmetic supplies, insurance, and marketing. Non-operating expenses may include interest on business debt or writing off unsellable inventory. \n3. Figure out your net income\nThis is the last step. It's subtracting all the expenses from your revenue. The net income will either be a profit or a loss—or, in very rare cases, zero. Your net income gives you a stronger picture of your business’s financial standing. \nKeep in mind that your profit and loss statement only gives you insight into the income you’re earning after accounting for expenses. You’ll also want to refer to your\nbalance sheet\nthat accounts for your liabilities to gain a full picture of how your business is doing.\nHow to read a P&L statement\nOnce you’ve put together your profit and loss statement, it’s useful to analyze it. It’ll show whether you’re profitable or not. But it also allows you to identify areas to save or reduce spending.\nDetermine profitability\nProfitability measures how much a business earns compared to its expenses. There are different ways to measure profitability. Two common measures of profitability are\ngross profit margin\nand\nnet profit margin\n.\nSay a window maker’s revenue was $500,000 last year. They spent $300,000 on COGS to make the windows. Net income for the year was $40,000.\nThe company's\ngross profit margin\nis 40% or ($500,000 - $300,000) \/ $500,000.\nIts\nnet profit margin\nis 8% or $40,000 \/ $500,000.\nMany small businesses aim for a net profit margin of 10%, although this will depend on your industry.\nAssess financial ratios\nBeyond profitability, the P&L can also help you calculate other ratios with help from the\nbalance sheet\n. These are the ratios you’ll want to look at:\nEfficiency ratios:\nThese assess how well a company uses its resources.\nAccounts receivable turnover ratios\n:\nThese show how well your business manages the money customers owe you for products or services you’ve provided.\nInventory turnover ratios\n:\nThese tell you how well your company manages its inventory. You can also use an inventory turnover calculator to help you see how your business is doing. \nComparing P&L statements \nP&L statements are most useful when comparing them to previous periods because they allow you to track progress over time. They’re also useful when it comes to setting goals for your business.\nYou can also compare your P&L to companies in your industry. This will help you determine where you stand relative to other businesses.\nExample of a profit and loss statement\nThere are two ways to set up your P&L statement: the single-step and multistep methods. Both work differently and offer different benefits, so let’s take a closer look at them in practice. \nThe single-step method\nThe single-step method of putting together a P&L statement is simple and straightforward. It involves only one calculation: subtracting all expenses from revenues to get net income. This method doesn't separate revenues and expenses into different categories.\nThe disadvantage of the single-step method is that it doesn't provide as much detail. This makes it difficult for businesses to analyze their\nprofitability\n. However, the single-step method is quick and easy to calculate. It works for businesses that don’t have many expenses.\nThe multistep method\nThe multistep method involves more calculations and the classification of expenses. But it makes assessing your company's profitability easier. It groups the cost to make products or services as costs of goods sold (COGS). The remaining expenses are either operating or non-operating. \nHere’s a simple profit and loss statement using the multistep method, which is what many businesses use: \nSpend more time growing your business\nAs a small business owner, you need to be aware of your company’s financial health. One of the best ways to do this is to analyze your profit and loss statement and assess key\nfinancial KPIs\n. Use the free profit and loss statement template to learn more about your company’s financial situation.\nRegularly reviewing your P&L will give you a better idea of how your business is doing.\nAccounting software\nlike QuickBooks Online makes creating your P&L and other financial statements easy, as well as assessing your spending.\nMarshall Hargrave\nMarshall Hargrave is a financial writer with nearly two decades of experience in finance, investing, and tax industries. He’s helped create and edit content for the likes of Investopedia, RobinHood, Fortune, and Yahoo! Finance. He’s also supported startups and small businesses with accounting, bookkeeping, and budgeting and worked with various finance organizations like the Consumer Bankers Association and the National Venture Capital Association. Marshall is a former Securities & Exchange Commission-registered investment adviser with a bachelor's degree in finance from Appalachian State University.\nRecommended for you\nGet the latest to your inbox\nNo Thanks\nLooking for something else?\nQuickBooks\nFrom big jobs to small tasks, we've got your business covered.\nFirm of the Future\nTopical articles and news from top pros and Intuit product experts.\nQuickBooks Support\nGet help with QuickBooks. Find articles, video tutorials, and more.","attrs_markdown":"2025-04-30 00:00:00 2026-03-16 00:00:00 https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/ Bookkeeping english A profit and loss (P\\&L) statement is a financial statement that shows a company’s revenues and expenses for a period. Learn how it works with a free template. https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en\\_us\/Blog\/Graphic\/what-is-a-profit-and-loss-statement-header-image-us-en.png https:\/\/https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/ What actually is a profit and loss statement + FREE template \\| QuickBooks\n\n[Get 50% OFF QuickBooks  for 3 months](https:\/\/quickbooks.intuit.com\/pricing\/?cid=cdist_wblog_id)\n\n[Buy now](https:\/\/quickbooks.intuit.com\/pricing\/?cid=cdist_wblog_id)\n\n[Buy now](https:\/\/quickbooks.intuit.com\/pricing\/?cid=cdist_wblog_id)\n\n[![QuickBooks](<data:image\/svg+xml,%3csvg xmlns='http:\/\/www.w3.org\/2000\/svg' fill='none' viewBox='0 0 36 36'%3e%3cpath fill='%232CA01C' d='M18 36c9.9411 0 18-8.0589 18-18 0-9.94114-8.0589-18-18-18C8.05886 0 0 8.05886 0 18c0 9.9411 8.05886 18 18 18Z'\/%3e%3cpath fill='white' d='M12.0002 11c-3.86797 0-6.99996 3.136-6.99996 7 0 3.868 3.13199 7 6.99996 7h1.0001v-2.6h-1.0001c-2.42798 0-4.39995-1.972-4.39995-4.4 0-2.428 1.97197-4.4 4.39995-4.4h2.4041v13.6c0 1.436 1.1639 2.6 2.5999 2.6V11h-5.004ZM24.0038 25c3.868 0 6.9999-3.1361 6.9999-7 0-3.868-3.1319-7-6.9999-7h-1.0001v2.5999h1.0001c2.428 0 4.3999 1.9721 4.3999 4.4001s-1.9719 4.3999-4.3999 4.3999h-2.4041V8.79997c0-1.43602-1.1639-2.60002-2.5999-2.60002V25h5.004Z'\/%3e%3c\/svg%3e>)](https:\/\/quickbooks.intuit.com\/)\n\n[Explore Products](https:\/\/quickbooks.intuit.com\/products\/?cid=cdist_wblog_products_nav)\n\nQuickBooks Blog\n\n![Search icon](<data:image\/svg+xml,%3c%3fxml version='1.0' encoding='UTF-8'%3f%3e%3csvg width='29' height='29' viewBox='0 0 29 29' fill='none' xmlns='http:\/\/www.w3.org\/2000\/svg'%3e %3cpath d='M11.7732 23.5302C14.1194 23.5302 16.3692 22.8224 18.2975 21.5354L25.1111 28.3243C25.9789 29.2252 27.4252 29.2252 28.3251 28.3243C29.225 27.4556 29.225 26.0077 28.3251 25.1068L21.5115 18.3178C25.1111 12.9446 23.697 5.64083 18.2975 2.00503C12.8981 -1.63076 5.63458 -0.182877 2.00281 5.22255C-1.62895 10.628 -0.182675 17.8996 5.21676 21.5354C7.17727 22.8545 9.45918 23.5302 11.7732 23.5302ZM11.7732 2.74506C16.7548 2.74506 20.8044 6.79913 20.8044 11.7863C20.8044 16.7734 16.7548 20.8275 11.7732 20.8275C6.7916 20.8275 2.77416 16.7734 2.77416 11.7863C2.77416 6.79913 6.7916 2.74506 11.7732 2.74506Z' fill='%232CA01C' \/%3e%3c\/svg%3e>)\n\n- [Start Your Business]()\n  Start Your Business\n  \n  - 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- [Running a Business Guide The tools and resources you need to run your business successfully.](https:\/\/quickbooks.intuit.com\/r\/running-a-business\/)\n    - [Accounting Accounting and bookkeeping basics you need to run and grow your business.](https:\/\/quickbooks.intuit.com\/r\/accounting\/)\n    - [Cash Flow Tax and bookkeeping basics you need to run and grow your business.](https:\/\/quickbooks.intuit.com\/r\/cash-flow\/)\n    - [Payroll Payroll essentials you need to run your business.](https:\/\/quickbooks.intuit.com\/r\/payroll\/)\n    - [Taxes Tax basics you need to stay compliant and run your business.](https:\/\/quickbooks.intuit.com\/r\/taxes\/)\n    - [Employees Everything you need to know about managing and retaining employees.](https:\/\/quickbooks.intuit.com\/r\/manage-employees\/)\n    [![Someone measuring the cash flow of their business.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/what-is-cash-flow-header-image-us-en.png)](https:\/\/quickbooks.intuit.com\/r\/cash-flow\/what-is-cash-flow\/)\n    \n    [What is cash flow and how does it work?](https:\/\/quickbooks.intuit.com\/r\/cash-flow\/what-is-cash-flow\/)\n    \n    [![Cafe business owners looking at financial statements on a laptop computer.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/reporting-overview-article-1.jpg)](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-business-owners-should-know-about-financial-statements\/)\n    \n    [What is a financial statement? Types and how to use them](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-business-owners-should-know-about-financial-statements\/)\n- [Grow Your Business](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/)\n  - - [Growing a Business Guide The tools and resources you need to take your business to the next level.](https:\/\/quickbooks.intuit.com\/r\/growing-a-business\/)\n    - [Sales & Marketing Spread the word: What you need to know about marketing your small business.](https:\/\/quickbooks.intuit.com\/r\/marketing\/)\n    - [Funding How to find funding and capital for your new or growing business.](https:\/\/quickbooks.intuit.com\/r\/funding\/)\n    - [Midsize Businesses The tools and resources you need to manage your mid-sized business.](https:\/\/quickbooks.intuit.com\/r\/midsize-business\/)\n    - [Enterprise Suite Blog New The tools and resources you need to grow your own business with confidence.](https:\/\/quickbooks.intuit.com\/r\/enterprise\/)\n    - [E-Commerce How to start and run a successful e-commerce business.](https:\/\/quickbooks.intuit.com\/r\/e-commerce\/)\n    [![A graphic shows someone applying for small business grants online.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/small-business-grants-hero.png)](https:\/\/quickbooks.intuit.com\/r\/funding\/small-business-grants\/)\n    \n    [40+ small business grants to apply for \\[plus tips, resources, and alternatives\\]](https:\/\/quickbooks.intuit.com\/r\/funding\/small-business-grants\/)\n    \n    [![Three hands of varying shades, each holding a different business payment method: cash, card, and check](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/business-payment-resource-header-image-us-en.png)](https:\/\/quickbooks.intuit.com\/r\/payments\/small-business-payment-methods\/)\n    \n    [Business payment methods explained: Costs and how to choose](https:\/\/quickbooks.intuit.com\/r\/payments\/small-business-payment-methods\/)\n- [Taxes](https:\/\/quickbooks.intuit.com\/r\/taxes\/)\n  - - [How to fill out a 1099-NEC form Learn how to fill out and file 1099-NEC forms for independent contractors and freelancers.](https:\/\/quickbooks.intuit.com\/r\/taxes\/how-to-fill-out-a-1099-form\/)\n    - [How to file small business taxes Learn how to navigate tax season with confidence and minimize your tax liability with this guide.](https:\/\/quickbooks.intuit.com\/r\/taxes\/file-small-business-taxes\/)\n    - [Small business 1099: What you need to know for 2025 Navigate the complexities of small business 1099 forms and filings with our comprehensive guide.](https:\/\/quickbooks.intuit.com\/r\/taxes\/small-business-guide-to-1099-form\/)\n    - [13 documents to give your accountant for small business taxes Your accountant will need these documents to file your small business taxes successfully.](https:\/\/quickbooks.intuit.com\/r\/taxes\/what-do-i-need-to-give-my-accountant-for-small-business-taxes\/)\n    [![Alt text: A small business owner reviewing their tax preparation checklist.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/small-business-tax-prep-checklist-hero-us-en.jpg)](https:\/\/quickbooks.intuit.com\/r\/taxes\/small-business-tax-prep-checklist\/)\n    \n    [Small business tax preparation checklist for 2026: 8 things business owners should know](https:\/\/quickbooks.intuit.com\/r\/taxes\/small-business-tax-prep-checklist\/)\n    \n    [![Man with curly hair focused on a laptop surrounded by tax-related icons including dollar signs and question marks, indicating uncertainty about sales tax matters.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/do-i-need-to-charge-sales-tax-header-image-us-en.png)](https:\/\/quickbooks.intuit.com\/r\/taxes\/need-collect-sales-tax-much\/)\n    \n    [Do I need to charge sales tax? A simplified guide for 2026](https:\/\/quickbooks.intuit.com\/r\/taxes\/need-collect-sales-tax-much\/)\n- [What's New](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/)\n  - - [News Browse the latest news, press releases, and reports from QuickBooks.](https:\/\/quickbooks.intuit.com\/r\/news\/)\n    - [AI Resource Hub AI Find the latest on Artificial Intelligence.](https:\/\/quickbooks.intuit.com\/r\/artificial-intelligence\/)\n    - [Small Business Data Fresh The latest research and insights for Small Businesses from QuickBooks.](https:\/\/quickbooks.intuit.com\/r\/small-business-data\/)\n    - [Small Business Stories Celebrating the stories and successes of real small business owners.](https:\/\/quickbooks.intuit.com\/r\/small-business-stories\/)\n    - [Holiday Success Everything you need to thrive during your business's busiest seasons.](https:\/\/quickbooks.intuit.com\/r\/holidays\/)\n    - [AI Innovations AI Browse the latest AI innovations in QuickBooks on the Intuit platform.](https:\/\/quickbooks.intuit.com\/r\/product-update\/ai-agents-innovation\/)\n    [![Image Alt Text](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Index-dashboard-hero-image-test.png)](https:\/\/quickbooks.intuit.com\/r\/small-business-data\/index\/)\n    \n    [Small Business Index](https:\/\/quickbooks.intuit.com\/r\/small-business-data\/index\/)\n    \n    [![A small business owner in a plant shop taking photos of products ](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/entrepreneurship-in-2025-report-hero.jpeg)](https:\/\/quickbooks.intuit.com\/r\/small-business-data\/entrepreneurship-in-2025\/)\n    \n    [Entrepreneurship in 2025: Trends and predictions for the year ahead](https:\/\/quickbooks.intuit.com\/r\/small-business-data\/entrepreneurship-in-2025\/)\n- [Tools](https:\/\/quickbooks.intuit.com\/r\/resources\/)\n  - - [All Tools Free accounting tools and templates to speed up and simplify your workflow.](https:\/\/quickbooks.intuit.com\/r\/resources\/)\n    - [AI-Powered Invoice Generator AI Try out this free invoice generator to create an invoice online using Intuit Intelligence.](https:\/\/quickbooks.intuit.com\/payments\/invoicing\/generator\/)\n    - [Payment Cost Calculator Find out how much you could save by switching to QuickBooks Payments.](https:\/\/quickbooks.intuit.com\/payments\/cost-calculator\/)\n    - [Paycheck Calculator Accurately estimate pay for all your employees.](https:\/\/quickbooks.intuit.com\/payroll\/paycheck-calculator\/)\n\n![A business owner looks at a profit and loss statement.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/what-is-a-profit-and-loss-statement-header-image-us-en.png)\n\n[Bookkeeping](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/)\n\n# What is a profit and loss (P\\&L) statement: Definition, examples, and template\nBy [Marshall Hargrave](https:\/\/quickbooks.intuit.com\/r\/author\/marshall-hargrave\/)\n\nPublished on April 30, 2025\n\n## **What is a profit and loss statement?**\nA profit and loss statement is a financial statement that shows a company’s revenue and expenses for a given period of time. You can create a simple profit and loss statement by using a template and entering your business’s information.\n\n[![ChatGPT](https:\/\/upload.wikimedia.org\/wikipedia\/commons\/0\/04\/ChatGPT_logo.svg)](https:\/\/chat.openai.com\/?q=Using%20the%20QuickBooks%20article%20%22What%20Is%20a%20Profit%20and%20Loss%20Statement%3F%22%20%28https%3A\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/%29%2C%20summarize%20the%20key%20points%20including%20what%20a%20profit%20and%20loss%20statement%20is%2C%20why%20it%20matters%20for%20business%20decision-making%2C%20and%20how%20to%20prepare%20one.%20Include%20an%20example%20with%20simple%20sample%20numbers.%20End%20by%20explaining%20how%20QuickBooks%20can%20help%20automate%20and%20simplify%20creating%2C%20updating%2C%20and%20interpreting%20profit%20and%20loss%20statements%20compared%20to%20doing%20them%20manually%20in%20spreadsheets. \"Open in ChatGPT\")   [![Claude AI](https:\/\/upload.wikimedia.org\/wikipedia\/commons\/8\/8a\/Claude_AI_logo.svg)](https:\/\/claude.ai\/new?q=Using%20the%20QuickBooks%20article%20%22What%20Is%20a%20Profit%20and%20Loss%20Statement%3F%22%20%28https%3A\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/%29%2C%20summarize%20the%20key%20points%20including%20what%20a%20profit%20and%20loss%20statement%20is%2C%20why%20it%20matters%20for%20business%20decision-making%2C%20and%20how%20to%20prepare%20one.%20Include%20an%20example%20with%20simple%20sample%20numbers.%20End%20by%20explaining%20how%20QuickBooks%20can%20help%20automate%20and%20simplify%20creating%2C%20updating%2C%20and%20interpreting%20profit%20and%20loss%20statements%20compared%20to%20doing%20them%20manually%20in%20spreadsheets. \"Open in Claude\")   [![Perplexity AI](https:\/\/uxwing.com\/wp-content\/themes\/uxwing\/download\/brands-and-social-media\/perplexity-ai-icon.png)](https:\/\/www.perplexity.ai\/search\/new?q=Using%20the%20QuickBooks%20article%20%22What%20Is%20a%20Profit%20and%20Loss%20Statement%3F%22%20%28https%3A\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/%29%2C%20summarize%20the%20key%20points%20including%20what%20a%20profit%20and%20loss%20statement%20is%2C%20why%20it%20matters%20for%20business%20decision-making%2C%20and%20how%20to%20prepare%20one.%20Include%20an%20example%20with%20simple%20sample%20numbers.%20End%20by%20explaining%20how%20QuickBooks%20can%20help%20automate%20and%20simplify%20creating%2C%20updating%2C%20and%20interpreting%20profit%20and%20loss%20statements%20compared%20to%20doing%20them%20manually%20in%20spreadsheets. \"Open in Perplexity\")   [![Gemini](https:\/\/upload.wikimedia.org\/wikipedia\/commons\/d\/d9\/Google_Gemini_logo_2025.svg)](https:\/\/www.google.com\/search?udm=50&aep=11&q=Using%20the%20QuickBooks%20article%20%22What%20Is%20a%20Profit%20and%20Loss%20Statement%3F%22%20%28https%3A\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/%29%2C%20summarize%20the%20key%20points%20including%20what%20a%20profit%20and%20loss%20statement%20is%2C%20why%20it%20matters%20for%20business%20decision-making%2C%20and%20how%20to%20prepare%20one.%20Include%20an%20example%20with%20simple%20sample%20numbers.%20End%20by%20explaining%20how%20QuickBooks%20can%20help%20automate%20and%20simplify%20creating%2C%20updating%2C%20and%20interpreting%20profit%20and%20loss%20statements%20compared%20to%20doing%20them%20manually%20in%20spreadsheets. \"Open in Gemini\")   [![Grok AI](https:\/\/logowik.com\/content\/uploads\/images\/grok-ai1793.logowik.com.webp)](https:\/\/x.com\/i\/grok?text=Using%20the%20QuickBooks%20article%20%22What%20Is%20a%20Profit%20and%20Loss%20Statement%3F%22%20%28https%3A\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/%29%2C%20summarize%20the%20key%20points%20including%20what%20a%20profit%20and%20loss%20statement%20is%2C%20why%20it%20matters%20for%20business%20decision-making%2C%20and%20how%20to%20prepare%20one.%20Include%20an%20example%20with%20simple%20sample%20numbers.%20End%20by%20explaining%20how%20QuickBooks%20can%20help%20automate%20and%20simplify%20creating%2C%20updating%2C%20and%20interpreting%20profit%20and%20loss%20statements%20compared%20to%20doing%20them%20manually%20in%20spreadsheets. \"Open in Grok\")\n\nA [profit and loss (P\\&L) statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/) is the same as an [income statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/income-statement-guide\/). It’s a financial document that includes a company’s revenues and expenses. Business owners use the P\\&L to understand how much money a company makes, which they can also quickly and easily do with accounting software.\n\nKnowing how to read a profit and loss sheet is key to making informed business decisions. It shows you where you might be able to cut costs. Let’s look at exactly what a P\\&L is and why it’s important, and get a free profit and loss statement template to simplify your process.\n\n- [What is the format of a profit & loss (P\\&L) statement?](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#format)\n- [How to do a profit and loss statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#howto)\n- [How to read a P\\&L statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#read)\n- [Example of a profit and loss statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#example)\n- [Spend more time growing your business](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#spend)\n\n![](https:\/\/i.ytimg.com\/vi\/nSGeKUO4HHE\/sddefault.jpg)\n\n![note icon](https:\/\/digitalasset.intuit.com\/render\/content\/dam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/Quick-answer-lightbulb-green.svg) Consider creating a quarterly profit and loss statement. This will help you see where your business stands throughout the year so you can adjust your strategies as needed.\n\n## What is the format of a profit & loss (P\\&L) statement?\nA profit and loss statement (P\\&L) is a snapshot of a company's sales and expenses over a period of time. It shows company revenues, expenses, and net income over that period. The bottom line on a P\\&L is net income, also known as profit or loss.\n\nThe profit and loss formula is:\n\n**Revenue - Expenses = Profit or loss**\n\nThere are many ways to format a P\\&L statement, but all versions include the same basic information. Sales are at the top of the statement, while expenses appear below. The profit or loss is the difference between the two.\n\nLet’s take a closer look at the main components of a profit and loss statement.\n\n![The layout of a profit and loss statement.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/profit-and-loss-statement-image1-us-en.png)\n\n### Revenue\nRevenue is the money your business makes from selling goods or services. It’s the very first line on the profit and loss statement. Note there are two types of revenue:\n\n- **Gross revenue**, or total revenue or sales, is the total amount you make before accounting for discounts, returns, or expenses.\n- **Net revenue**, also known as net sales, is the money you make after deducting discounts and returns.\n\nNote that net revenue is gross revenue minus discounts and returns.\n\n### Expenses\nThe expenses of a business include all the costs to generate revenue.\n\n**Cost of goods sold (COGS)** is the cost of materials and labor a company uses to make a product or service. It’s also known as the cost of sales. The costs can include raw materials or direct wages for employees. But also certain overhead costs, such as utilities.\n\nCOGS are expenses that show up on the top part of the P\\&L before gross profit. [Gross profit](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/gross-profit\/) is the money you make from sales after subtracting your cost of goods sold, using the formula:\n\n**Gross profit = Net revenue - Cost of goods sold**\n\nOther expenses can be operating or non-operating.\n\n[**Operating expenses**](https:\/\/quickbooks.intuit.com\/r\/accounting\/operating-costs\/)are the costs of running your business. While COGS are for making a product, operating expenses are the costs to support that process. Operating expenses include:\n\n- Rent\n- Marketing costs\n- Salaries for admin staff\n- [Depreciation](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/depreciation\/)\n- Licensing fees\n\n**Non-operating expenses** are costs not part of your core operations. These include taxes, fines, legal fees, and interest. Non-operating expenses include anything unlikely to happen again. For example, losses due to shutting down a business operation.\n\n[![A person sitting at a desk with a laptop computer.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Headshots\/qbl-allison-bookkeeper-cta-image-us-en.jpg)](https:\/\/quickbooks.intuit.com\/oa\/expert-help\/)\n\n### **Run your business with confidence**\nGet help and guidance when you need it from real QuickBooks experts.\\*\n\n[Start here](https:\/\/quickbooks.intuit.com\/oa\/expert-help\/)\n\n### Income\nIncome is how much money you make in your business. There are two key types of income—operating and [net income](https:\/\/quickbooks.intuit.com\/r\/bookkeeping-processes\/net-income-formula\/).\n\n**Operating income** is a business's income from its core operations. It excludes non-operating expenses, such as taxes or interest expenses. This type of income measures how well a company generates money from its main business. The formula for operating income is:\n\n**Operating income = Gross profit - Operating expenses**\n\n**Net income** is your bottom line—the last item on your P\\&L. It's the money left after subtracting all expenses.\n\n**Net income = revenue - COGS - Operating expenses - Non-operating expenses**\n\nNet income comes after both operating and non-operating expenses on the P\\&L. It’s a measure of the money left over for shareholders or owners.\n\n## How to do a profit and loss statement\nThe P\\&L will include three key components—revenue, expenses, and income. These components help you understand where your business is doing well, where you may be able to cut costs, and how much you’re earning after covering those expenses.\n\nThough you can put a profit and loss statement together from scratch, using a profit and loss statement template is far easier. For example, our template includes space for the three components and helps you organize your information in a usable way.\n\nLet’s look at how you can use the template to create a functional profit and loss statement for your business.\n\n[![Download our P\\&L statement template.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/download-profit-and-loss-statement-template-button-image-us-en.jpg)](https:\/\/digitalasset.intuit.com\/render\/content\/dam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/profit-and-loss-statement-us-en.pdf)\n\n### 1\\. Start with revenue\nDetermine what period you want to create a profit and loss statement for. This can be any period, but it’s generally best practice to put together a P\\&L monthly to help identify trends.\n\nYou’ll want to calculate your gross revenue ‌for that period and list it on the top line of your P\\&L statement.\n\n### 2\\. Calculate your costs\nAfter accounting for all your revenues, group your expenses into one of three categories:\n\n- Cost of goods sold (COGS)\n- Operating expenses\n- Non-operating expenses\n\n**COGS are all the costs of making a product**. For a service business that doesn’t make a physical product, COGS can include labor for employees performing the service. For example, a hair stylist’s COGS would include the time spent styling hair.\n\nYou'll group all the other business costs as operating expenses. Non-operating expenses should be everything that's left. This will be the money you spend on things like taxes and interest.\n\n- For example, a hairstylist would have operating expenses like cosmetic supplies, insurance, and marketing. Non-operating expenses may include interest on business debt or writing off unsellable inventory.\n### 3\\. Figure out your net income\nThis is the last step. It's subtracting all the expenses from your revenue. The net income will either be a profit or a loss—or, in very rare cases, zero. Your net income gives you a stronger picture of your business’s financial standing.\n\nKeep in mind that your profit and loss statement only gives you insight into the income you’re earning after accounting for expenses. You’ll also want to refer to your [balance sheet](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-balance-sheet\/) that accounts for your liabilities to gain a full picture of how your business is doing.\n\n![The differences between profit and loss statements and balance sheets.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/profit-and-loss-statement-vs-balance-sheet-image-us-en.jpg)\n\n## How to read a P\\&L statement\nOnce you’ve put together your profit and loss statement, it’s useful to analyze it. It’ll show whether you’re profitable or not. But it also allows you to identify areas to save or reduce spending.\n\n### Determine profitability\nProfitability measures how much a business earns compared to its expenses. There are different ways to measure profitability. Two common measures of profitability are **gross profit margin** and **net profit margin**.\n\nSay a window maker’s revenue was \\$500,000 last year. They spent \\$300,000 on COGS to make the windows. Net income for the year was \\$40,000.\n\nThe company's **gross profit margin** is 40% or (\\$500,000 - \\$300,000) \/ \\$500,000.\n\nIts **net profit margin** is 8% or \\$40,000 \/ \\$500,000.\n\nMany small businesses aim for a net profit margin of 10%, although this will depend on your industry.\n\n![Key profitability ratios for gross profit margin and net profit margin explained.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/gross-profit-margin-vs-net-profit-margin-image1-us-en.png)\n\n### Assess financial ratios\nBeyond profitability, the P\\&L can also help you calculate other ratios with help from the [balance sheet](https:\/\/quickbooks.intuit.com\/r\/accounting\/balance-sheet-vs-profit-and-loss-statement\/). These are the ratios you’ll want to look at:\n\n- **Efficiency ratios:** These assess how well a company uses its resources.\n- [**Accounts receivable turnover ratios**](https:\/\/quickbooks.intuit.com\/r\/accounting\/calculate-accounts-receivable-turnover-ratio\/)**:** These show how well your business manages the money customers owe you for products or services you’ve provided.\n- [**Inventory turnover ratios**](https:\/\/quickbooks.intuit.com\/accounting\/inventory\/turnover\/#inventory-turnover)**:** These tell you how well your company manages its inventory. You can also use an inventory turnover calculator to help you see how your business is doing.\n### Comparing P\\&L statements\nP\\&L statements are most useful when comparing them to previous periods because they allow you to track progress over time. They’re also useful when it comes to setting goals for your business.\n\n![note icon](https:\/\/digitalasset.intuit.com\/render\/content\/dam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/Quick-answer-lightbulb-green.svg) You can also compare your P\\&L to companies in your industry. This will help you determine where you stand relative to other businesses.\n\n## Example of a profit and loss statement\nThere are two ways to set up your P\\&L statement: the single-step and multistep methods. Both work differently and offer different benefits, so let’s take a closer look at them in practice.\n\n### The single-step method\nThe single-step method of putting together a P\\&L statement is simple and straightforward. It involves only one calculation: subtracting all expenses from revenues to get net income. This method doesn't separate revenues and expenses into different categories.\n\n![Table](https:\/\/datawrapper.dwcdn.net\/WL28g\/full.png)\n\nThe disadvantage of the single-step method is that it doesn't provide as much detail. This makes it difficult for businesses to analyze their [profitability](https:\/\/quickbooks.intuit.com\/r\/pricing-strategy\/4-ways-to-measure-your-profitability\/). However, the single-step method is quick and easy to calculate. It works for businesses that don’t have many expenses.\n\n### The multistep method\nThe multistep method involves more calculations and the classification of expenses. But it makes assessing your company's profitability easier. It groups the cost to make products or services as costs of goods sold (COGS). The remaining expenses are either operating or non-operating.\n\nHere’s a simple profit and loss statement using the multistep method, which is what many businesses use:\n\n![Table](https:\/\/datawrapper.dwcdn.net\/kQ92N\/full.png)\n\n## Spend more time growing your business\nAs a small business owner, you need to be aware of your company’s financial health. One of the best ways to do this is to analyze your profit and loss statement and assess key [financial KPIs](https:\/\/quickbooks.intuit.com\/r\/financial-management\/5-financial-kpis-gauge-business-health\/). Use the free profit and loss statement template to learn more about your company’s financial situation.\n\nRegularly reviewing your P\\&L will give you a better idea of how your business is doing. [Accounting software](https:\/\/quickbooks.intuit.com\/online\/) like QuickBooks Online makes creating your P\\&L and other financial statements easy, as well as assessing your spending.\n\nShare\n\nShare\n\n![A person wearing glasses and a red sweater.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Headshots\/siege-marshall-hargrave-image-us-en.jpg)\n\n[Marshall Hargrave](https:\/\/quickbooks.intuit.com\/r\/author\/marshall-hargrave\/)  \nMarshall Hargrave is a financial writer with nearly two decades of experience in finance, investing, and tax industries. He’s helped create and edit content for the likes of Investopedia, RobinHood, Fortune, and Yahoo! Finance. He’s also supported startups and small businesses with accounting, bookkeeping, and budgeting and worked with various finance organizations like the Consumer Bankers Association and the National Venture Capital Association. Marshall is a former Securities & Exchange Commission-registered investment adviser with a bachelor's degree in finance from Appalachian State University.\n## Recommended for you\n[![An illustration of a business owner getting documents together for an accountant.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/what-to-give-accountant-for-taxes-image-us-en.png)](https:\/\/quickbooks.intuit.com\/r\/taxes\/what-do-i-need-to-give-my-accountant-for-small-business-taxes\/)\n\n[taxes 13 documents to give your accountant for small business taxes January 21, 2026](https:\/\/quickbooks.intuit.com\/r\/taxes\/what-do-i-need-to-give-my-accountant-for-small-business-taxes\/)\n\n[![A business owner working on accounts payable.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/accounts-payable-hero-image-us-en.jpg)](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/accounts-payable\/)\n\n[Bookkeeping The benefits of accounts payable: A strategic guide to improving cash flow February 6, 2026](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/accounts-payable\/)\n\n[![An illustration of bookkeeping tools](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/bookkeeping-tips-hero.png)](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/13-bookkeeping-tips\/)\n\n[Bookkeeping 13 bookkeeping tips every small business can benefit from October 13, 2025](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/13-bookkeeping-tips\/)\n\n![Mail icon](<data:image\/svg+xml,%3csvg width='44' height='44' viewBox='0 0 44 44' fill='none' xmlns='http:\/\/www.w3.org\/2000\/svg'%3e %3crect width='44' height='44' rx='22' fill='%2307C4D9'\/%3e %3cpath d='M29 14H15C14.2044 14 13.4413 14.3161 12.8787 14.8787C12.3161 15.4413 12 16.2044 12 17V27C12 27.7956 12.3161 28.5587 12.8787 29.1213C13.4413 29.6839 14.2044 30 15 30H29C29.7956 30 30.5587 29.6839 31.1213 29.1213C31.6839 28.5587 32 27.7956 32 27V17C32 16.2044 31.6839 15.4413 31.1213 14.8787C30.5587 14.3161 29.7956 14 29 14V14ZM15 16H29C29.2652 16 29.5196 16.1054 29.7071 16.2929C29.8946 16.4804 30 16.7348 30 17V18.279L22.316 20.841C22.1107 20.9085 21.8893 20.9085 21.684 20.841L14 18.279V17C14 16.7348 14.1054 16.4804 14.2929 16.2929C14.4804 16.1054 14.7348 16 15 16V16ZM29 28H15C14.7348 28 14.4804 27.8946 14.2929 27.7071C14.1054 27.5196 14 27.2652 14 27V20.387L21.051 22.738C21.6678 22.9424 22.3342 22.9424 22.951 22.738L30 20.387V27C30 27.2652 29.8946 27.5196 29.7071 27.7071C29.5196 27.8946 29.2652 28 29 28Z' fill='white'\/%3e%3c\/svg%3e>)\n\n###### Get the latest to your inbox\nSubscribe\n\nNo Thanks\n\nImportant offers, pricing details and disclaimers\n\n- - This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. 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You can create a simple profit and loss statement by using a template and entering your business’s information.\n\nA [profit and loss (P\\&L) statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/) is the same as an [income statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/income-statement-guide\/). It’s a financial document that includes a company’s revenues and expenses. Business owners use the P\\&L to understand how much money a company makes, which they can also quickly and easily do with accounting software.\n\nKnowing how to read a profit and loss sheet is key to making informed business decisions. It shows you where you might be able to cut costs. Let’s look at exactly what a P\\&L is and why it’s important, and get a free profit and loss statement template to simplify your process.\n\n- [What is the format of a profit & loss (P\\&L) statement?](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#format)\n- [How to do a profit and loss statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#howto)\n- [How to read a P\\&L statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#read)\n- [Example of a profit and loss statement](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#example)\n- [Spend more time growing your business](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-profit-and-loss-statement\/#spend)\n\n![](https:\/\/i.ytimg.com\/vi\/nSGeKUO4HHE\/sddefault.jpg)\n\n![note icon](https:\/\/digitalasset.intuit.com\/render\/content\/dam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/Quick-answer-lightbulb-green.svg) Consider creating a quarterly profit and loss statement. This will help you see where your business stands throughout the year so you can adjust your strategies as needed.\n\n## What is the format of a profit & loss (P\\&L) statement?\nA profit and loss statement (P\\&L) is a snapshot of a company's sales and expenses over a period of time. It shows company revenues, expenses, and net income over that period. The bottom line on a P\\&L is net income, also known as profit or loss.\n\nThe profit and loss formula is:\n\n**Revenue - Expenses = Profit or loss**\n\nThere are many ways to format a P\\&L statement, but all versions include the same basic information. Sales are at the top of the statement, while expenses appear below. The profit or loss is the difference between the two.\n\nLet’s take a closer look at the main components of a profit and loss statement.\n\n![The layout of a profit and loss statement.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/profit-and-loss-statement-image1-us-en.png)\n\n### Revenue\nRevenue is the money your business makes from selling goods or services. It’s the very first line on the profit and loss statement. Note there are two types of revenue:\n\n- **Gross revenue**, or total revenue or sales, is the total amount you make before accounting for discounts, returns, or expenses.\n- **Net revenue**, also known as net sales, is the money you make after deducting discounts and returns.\n\nNote that net revenue is gross revenue minus discounts and returns.\n\n### Expenses\nThe expenses of a business include all the costs to generate revenue.\n\n**Cost of goods sold (COGS)** is the cost of materials and labor a company uses to make a product or service. It’s also known as the cost of sales. The costs can include raw materials or direct wages for employees. But also certain overhead costs, such as utilities.\n\nCOGS are expenses that show up on the top part of the P\\&L before gross profit. [Gross profit](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/gross-profit\/) is the money you make from sales after subtracting your cost of goods sold, using the formula:\n\n**Gross profit = Net revenue - Cost of goods sold**\n\nOther expenses can be operating or non-operating.\n\n[**Operating expenses**](https:\/\/quickbooks.intuit.com\/r\/accounting\/operating-costs\/)are the costs of running your business. While COGS are for making a product, operating expenses are the costs to support that process. Operating expenses include:\n\n- Rent\n- Marketing costs\n- Salaries for admin staff\n- [Depreciation](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/depreciation\/)\n- Licensing fees\n\n**Non-operating expenses** are costs not part of your core operations. These include taxes, fines, legal fees, and interest. Non-operating expenses include anything unlikely to happen again. For example, losses due to shutting down a business operation.\n\n[![A person sitting at a desk with a laptop computer.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Headshots\/qbl-allison-bookkeeper-cta-image-us-en.jpg)](https:\/\/quickbooks.intuit.com\/oa\/expert-help\/)\n\n### **Run your business with confidence**\nGet help and guidance when you need it from real QuickBooks experts.\\*\n\n### Income\nIncome is how much money you make in your business. There are two key types of income—operating and [net income](https:\/\/quickbooks.intuit.com\/r\/bookkeeping-processes\/net-income-formula\/).\n\n**Operating income** is a business's income from its core operations. It excludes non-operating expenses, such as taxes or interest expenses. This type of income measures how well a company generates money from its main business. The formula for operating income is:\n\n**Operating income = Gross profit - Operating expenses**\n\n**Net income** is your bottom line—the last item on your P\\&L. It's the money left after subtracting all expenses.\n\n**Net income = revenue - COGS - Operating expenses - Non-operating expenses**\n\nNet income comes after both operating and non-operating expenses on the P\\&L. It’s a measure of the money left over for shareholders or owners.\n\n## How to do a profit and loss statement\nThe P\\&L will include three key components—revenue, expenses, and income. These components help you understand where your business is doing well, where you may be able to cut costs, and how much you’re earning after covering those expenses.\n\nThough you can put a profit and loss statement together from scratch, using a profit and loss statement template is far easier. For example, our template includes space for the three components and helps you organize your information in a usable way.\n\nLet’s look at how you can use the template to create a functional profit and loss statement for your business.\n\n[![Download our P\\&L statement template.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/download-profit-and-loss-statement-template-button-image-us-en.jpg)](https:\/\/digitalasset.intuit.com\/render\/content\/dam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/profit-and-loss-statement-us-en.pdf)\n\n### 1\\. Start with revenue\nDetermine what period you want to create a profit and loss statement for. This can be any period, but it’s generally best practice to put together a P\\&L monthly to help identify trends.\n\nYou’ll want to calculate your gross revenue ‌for that period and list it on the top line of your P\\&L statement.\n\n### 2\\. Calculate your costs\nAfter accounting for all your revenues, group your expenses into one of three categories:\n\n- Cost of goods sold (COGS)\n- Operating expenses\n- Non-operating expenses\n\n**COGS are all the costs of making a product**. For a service business that doesn’t make a physical product, COGS can include labor for employees performing the service. For example, a hair stylist’s COGS would include the time spent styling hair.\n\nYou'll group all the other business costs as operating expenses. Non-operating expenses should be everything that's left. This will be the money you spend on things like taxes and interest.\n\n- For example, a hairstylist would have operating expenses like cosmetic supplies, insurance, and marketing. Non-operating expenses may include interest on business debt or writing off unsellable inventory.\n### 3\\. Figure out your net income\nThis is the last step. It's subtracting all the expenses from your revenue. The net income will either be a profit or a loss—or, in very rare cases, zero. Your net income gives you a stronger picture of your business’s financial standing.\n\nKeep in mind that your profit and loss statement only gives you insight into the income you’re earning after accounting for expenses. You’ll also want to refer to your [balance sheet](https:\/\/quickbooks.intuit.com\/r\/bookkeeping\/what-is-a-balance-sheet\/) that accounts for your liabilities to gain a full picture of how your business is doing.\n\n![The differences between profit and loss statements and balance sheets.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Stock\/profit-and-loss-statement-vs-balance-sheet-image-us-en.jpg)\n\n## How to read a P\\&L statement\nOnce you’ve put together your profit and loss statement, it’s useful to analyze it. It’ll show whether you’re profitable or not. But it also allows you to identify areas to save or reduce spending.\n\n### Determine profitability\nProfitability measures how much a business earns compared to its expenses. There are different ways to measure profitability. Two common measures of profitability are **gross profit margin** and **net profit margin**.\n\nSay a window maker’s revenue was \\$500,000 last year. They spent \\$300,000 on COGS to make the windows. Net income for the year was \\$40,000.\n\nThe company's **gross profit margin** is 40% or (\\$500,000 - \\$300,000) \/ \\$500,000.\n\nIts **net profit margin** is 8% or \\$40,000 \/ \\$500,000.\n\nMany small businesses aim for a net profit margin of 10%, although this will depend on your industry.\n\n![Key profitability ratios for gross profit margin and net profit margin explained.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/gross-profit-margin-vs-net-profit-margin-image1-us-en.png)\n\n### Assess financial ratios\nBeyond profitability, the P\\&L can also help you calculate other ratios with help from the [balance sheet](https:\/\/quickbooks.intuit.com\/r\/accounting\/balance-sheet-vs-profit-and-loss-statement\/). These are the ratios you’ll want to look at:\n\n- **Efficiency ratios:** These assess how well a company uses its resources.\n- [**Accounts receivable turnover ratios**](https:\/\/quickbooks.intuit.com\/r\/accounting\/calculate-accounts-receivable-turnover-ratio\/)**:** These show how well your business manages the money customers owe you for products or services you’ve provided.\n- [**Inventory turnover ratios**](https:\/\/quickbooks.intuit.com\/accounting\/inventory\/turnover\/#inventory-turnover)**:** These tell you how well your company manages its inventory. You can also use an inventory turnover calculator to help you see how your business is doing.\n### Comparing P\\&L statements\nP\\&L statements are most useful when comparing them to previous periods because they allow you to track progress over time. They’re also useful when it comes to setting goals for your business.\n\n![note icon](https:\/\/digitalasset.intuit.com\/render\/content\/dam\/intuit\/sbseg\/en_us\/Blog\/Graphic\/Quick-answer-lightbulb-green.svg) You can also compare your P\\&L to companies in your industry. This will help you determine where you stand relative to other businesses.\n\n## Example of a profit and loss statement\nThere are two ways to set up your P\\&L statement: the single-step and multistep methods. Both work differently and offer different benefits, so let’s take a closer look at them in practice.\n\n### The single-step method\nThe single-step method of putting together a P\\&L statement is simple and straightforward. It involves only one calculation: subtracting all expenses from revenues to get net income. This method doesn't separate revenues and expenses into different categories.\n\nThe disadvantage of the single-step method is that it doesn't provide as much detail. This makes it difficult for businesses to analyze their [profitability](https:\/\/quickbooks.intuit.com\/r\/pricing-strategy\/4-ways-to-measure-your-profitability\/). However, the single-step method is quick and easy to calculate. It works for businesses that don’t have many expenses.\n\n### The multistep method\nThe multistep method involves more calculations and the classification of expenses. But it makes assessing your company's profitability easier. It groups the cost to make products or services as costs of goods sold (COGS). The remaining expenses are either operating or non-operating.\n\nHere’s a simple profit and loss statement using the multistep method, which is what many businesses use:\n\n## Spend more time growing your business\nAs a small business owner, you need to be aware of your company’s financial health. One of the best ways to do this is to analyze your profit and loss statement and assess key [financial KPIs](https:\/\/quickbooks.intuit.com\/r\/financial-management\/5-financial-kpis-gauge-business-health\/). Use the free profit and loss statement template to learn more about your company’s financial situation.\n\nRegularly reviewing your P\\&L will give you a better idea of how your business is doing. [Accounting software](https:\/\/quickbooks.intuit.com\/online\/) like QuickBooks Online makes creating your P\\&L and other financial statements easy, as well as assessing your spending.\n\n![A person wearing glasses and a red sweater.](https:\/\/quickbooks.intuit.com\/oidam\/intuit\/sbseg\/en_us\/Blog\/Photography\/Headshots\/siege-marshall-hargrave-image-us-en.jpg)\n\n[Marshall Hargrave](https:\/\/quickbooks.intuit.com\/r\/author\/marshall-hargrave\/)  \nMarshall Hargrave is a financial writer with nearly two decades of experience in finance, investing, and tax industries. He’s helped create and edit content for the likes of Investopedia, RobinHood, Fortune, and Yahoo! Finance. He’s also supported startups and small businesses with accounting, bookkeeping, and budgeting and worked with various finance organizations like the Consumer Bankers Association and the National Venture Capital Association. Marshall is a former Securities & Exchange Commission-registered investment adviser with a bachelor's degree in finance from Appalachian State University.\n## Recommended for you\n![Mail icon](<data:image\/svg+xml,%3csvg width='44' height='44' viewBox='0 0 44 44' fill='none' xmlns='http:\/\/www.w3.org\/2000\/svg'%3e %3crect width='44' height='44' rx='22' fill='%2307C4D9'\/%3e %3cpath d='M29 14H15C14.2044 14 13.4413 14.3161 12.8787 14.8787C12.3161 15.4413 12 16.2044 12 17V27C12 27.7956 12.3161 28.5587 12.8787 29.1213C13.4413 29.6839 14.2044 30 15 30H29C29.7956 30 30.5587 29.6839 31.1213 29.1213C31.6839 28.5587 32 27.7956 32 27V17C32 16.2044 31.6839 15.4413 31.1213 14.8787C30.5587 14.3161 29.7956 14 29 14V14ZM15 16H29C29.2652 16 29.5196 16.1054 29.7071 16.2929C29.8946 16.4804 30 16.7348 30 17V18.279L22.316 20.841C22.1107 20.9085 21.8893 20.9085 21.684 20.841L14 18.279V17C14 16.7348 14.1054 16.4804 14.2929 16.2929C14.4804 16.1054 14.7348 16 15 16V16ZM29 28H15C14.7348 28 14.4804 27.8946 14.2929 27.7071C14.1054 27.5196 14 27.2652 14 27V20.387L21.051 22.738C21.6678 22.9424 22.3342 22.9424 22.951 22.738L30 20.387V27C30 27.2652 29.8946 27.5196 29.7071 27.7071C29.5196 27.8946 29.2652 28 29 28Z' fill='white'\/%3e%3c\/svg%3e>)\n\n###### Get the latest to your inbox\nNo Thanks\n\n### Looking for something else?\n### QuickBooks\nFrom big jobs to small tasks, we've got your business covered.\n\n### Firm of the Future\nTopical articles and news from top pros and Intuit product experts.\n\n### QuickBooks Support\nGet help with QuickBooks. 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Boilerpipe Text	Bookkeeping What is a profit and loss (P&L) statement: Definition, examples, and template Published on April 30, 2025 A profit and loss statement is a financial statement that shows a company’s revenue and expenses for a given period of time. You can create a simple profit and loss statement by using a template and entering your business’s information. A profit and loss (P&L) statement is the same as an income statement . It’s a financial document that includes a company’s revenues and expenses. Business owners use the P&L to understand how much money a company makes, which they can also quickly and easily do with accounting software. Knowing how to read a profit and loss sheet is key to making informed business decisions. It shows you where you might be able to cut costs. Let’s look at exactly what a P&L is and why it’s important, and get a free profit and loss statement template to simplify your process. What is the format of a profit & loss (P&L) statement? How to do a profit and loss statement How to read a P&L statement Example of a profit and loss statement Spend more time growing your business Consider creating a quarterly profit and loss statement. This will help you see where your business stands throughout the year so you can adjust your strategies as needed. What is the format of a profit & loss (P&L) statement? A profit and loss statement (P&L) is a snapshot of a company's sales and expenses over a period of time. It shows company revenues, expenses, and net income over that period. The bottom line on a P&L is net income, also known as profit or loss. The profit and loss formula is: Revenue - Expenses = Profit or loss There are many ways to format a P&L statement, but all versions include the same basic information. Sales are at the top of the statement, while expenses appear below. The profit or loss is the difference between the two. Let’s take a closer look at the main components of a profit and loss statement. Revenue Revenue is the money your business makes from selling goods or services. It’s the very first line on the profit and loss statement. Note there are two types of revenue: Gross revenue , or total revenue or sales, is the total amount you make before accounting for discounts, returns, or expenses. Net revenue , also known as net sales, is the money you make after deducting discounts and returns. Note that net revenue is gross revenue minus discounts and returns. Expenses The expenses of a business include all the costs to generate revenue. Cost of goods sold (COGS) is the cost of materials and labor a company uses to make a product or service. It’s also known as the cost of sales. The costs can include raw materials or direct wages for employees. But also certain overhead costs, such as utilities. COGS are expenses that show up on the top part of the P&L before gross profit. Gross profit is the money you make from sales after subtracting your cost of goods sold, using the formula: Gross profit = Net revenue - Cost of goods sold Other expenses can be operating or non-operating. Operating expenses are the costs of running your business. While COGS are for making a product, operating expenses are the costs to support that process. Operating expenses include: Rent Marketing costs Salaries for admin staff Depreciation Licensing fees Non-operating expenses are costs not part of your core operations. These include taxes, fines, legal fees, and interest. Non-operating expenses include anything unlikely to happen again. For example, losses due to shutting down a business operation. Run your business with confidence Get help and guidance when you need it from real QuickBooks experts.* Income Income is how much money you make in your business. There are two key types of income—operating and net income . Operating income is a business's income from its core operations. It excludes non-operating expenses, such as taxes or interest expenses. This type of income measures how well a company generates money from its main business. The formula for operating income is: Operating income = Gross profit - Operating expenses Net income is your bottom line—the last item on your P&L. It's the money left after subtracting all expenses. Net income = revenue - COGS - Operating expenses - Non-operating expenses Net income comes after both operating and non-operating expenses on the P&L. It’s a measure of the money left over for shareholders or owners. How to do a profit and loss statement The P&L will include three key components—revenue, expenses, and income. These components help you understand where your business is doing well, where you may be able to cut costs, and how much you’re earning after covering those expenses. Though you can put a profit and loss statement together from scratch, using a profit and loss statement template is far easier. For example, our template includes space for the three components and helps you organize your information in a usable way. Let’s look at how you can use the template to create a functional profit and loss statement for your business. 1. Start with revenue Determine what period you want to create a profit and loss statement for. This can be any period, but it’s generally best practice to put together a P&L monthly to help identify trends. You’ll want to calculate your gross revenue ‌for that period and list it on the top line of your P&L statement. 2. Calculate your costs After accounting for all your revenues, group your expenses into one of three categories: Cost of goods sold (COGS) Operating expenses Non-operating expenses COGS are all the costs of making a product . For a service business that doesn’t make a physical product, COGS can include labor for employees performing the service. For example, a hair stylist’s COGS would include the time spent styling hair. You'll group all the other business costs as operating expenses. Non-operating expenses should be everything that's left. This will be the money you spend on things like taxes and interest. For example, a hairstylist would have operating expenses like cosmetic supplies, insurance, and marketing. Non-operating expenses may include interest on business debt or writing off unsellable inventory. 3. Figure out your net income This is the last step. It's subtracting all the expenses from your revenue. The net income will either be a profit or a loss—or, in very rare cases, zero. Your net income gives you a stronger picture of your business’s financial standing. Keep in mind that your profit and loss statement only gives you insight into the income you’re earning after accounting for expenses. You’ll also want to refer to your balance sheet that accounts for your liabilities to gain a full picture of how your business is doing. How to read a P&L statement Once you’ve put together your profit and loss statement, it’s useful to analyze it. It’ll show whether you’re profitable or not. But it also allows you to identify areas to save or reduce spending. Determine profitability Profitability measures how much a business earns compared to its expenses. There are different ways to measure profitability. Two common measures of profitability are gross profit margin and net profit margin . Say a window maker’s revenue was $500,000 last year. They spent $300,000 on COGS to make the windows. Net income for the year was $40,000. The company's gross profit margin is 40% or ($500,000 - $300,000) / $500,000. Its net profit margin is 8% or $40,000 / $500,000. Many small businesses aim for a net profit margin of 10%, although this will depend on your industry. Assess financial ratios Beyond profitability, the P&L can also help you calculate other ratios with help from the balance sheet . These are the ratios you’ll want to look at: Efficiency ratios: These assess how well a company uses its resources. Accounts receivable turnover ratios : These show how well your business manages the money customers owe you for products or services you’ve provided. Inventory turnover ratios : These tell you how well your company manages its inventory. You can also use an inventory turnover calculator to help you see how your business is doing. Comparing P&L statements P&L statements are most useful when comparing them to previous periods because they allow you to track progress over time. They’re also useful when it comes to setting goals for your business. You can also compare your P&L to companies in your industry. This will help you determine where you stand relative to other businesses. Example of a profit and loss statement There are two ways to set up your P&L statement: the single-step and multistep methods. Both work differently and offer different benefits, so let’s take a closer look at them in practice. The single-step method The single-step method of putting together a P&L statement is simple and straightforward. It involves only one calculation: subtracting all expenses from revenues to get net income. This method doesn't separate revenues and expenses into different categories. The disadvantage of the single-step method is that it doesn't provide as much detail. This makes it difficult for businesses to analyze their profitability . However, the single-step method is quick and easy to calculate. It works for businesses that don’t have many expenses. The multistep method The multistep method involves more calculations and the classification of expenses. But it makes assessing your company's profitability easier. It groups the cost to make products or services as costs of goods sold (COGS). The remaining expenses are either operating or non-operating. Here’s a simple profit and loss statement using the multistep method, which is what many businesses use: Spend more time growing your business As a small business owner, you need to be aware of your company’s financial health. One of the best ways to do this is to analyze your profit and loss statement and assess key financial KPIs . Use the free profit and loss statement template to learn more about your company’s financial situation. Regularly reviewing your P&L will give you a better idea of how your business is doing. Accounting software like QuickBooks Online makes creating your P&L and other financial statements easy, as well as assessing your spending. Marshall Hargrave Marshall Hargrave is a financial writer with nearly two decades of experience in finance, investing, and tax industries. He’s helped create and edit content for the likes of Investopedia, RobinHood, Fortune, and Yahoo! Finance. He’s also supported startups and small businesses with accounting, bookkeeping, and budgeting and worked with various finance organizations like the Consumer Bankers Association and the National Venture Capital Association. Marshall is a former Securities & Exchange Commission-registered investment adviser with a bachelor's degree in finance from Appalachian State University. Recommended for you Get the latest to your inbox No Thanks Looking for something else? QuickBooks From big jobs to small tasks, we've got your business covered. Firm of the Future Topical articles and news from top pros and Intuit product experts. QuickBooks Support Get help with QuickBooks. Find articles, video tutorials, and more.
Markdown	2025-04-30 00:00:00 2026-03-16 00:00:00 https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/ Bookkeeping english A profit and loss (P\&L) statement is a financial statement that shows a company’s revenues and expenses for a period. Learn how it works with a free template. https://quickbooks.intuit.com/oidam/intuit/sbseg/en\_us/Blog/Graphic/what-is-a-profit-and-loss-statement-header-image-us-en.png https://https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/ What actually is a profit and loss statement + FREE template \\| QuickBooks [Get 50% OFF QuickBooks for 3 months](https://quickbooks.intuit.com/pricing/?cid=cdist_wblog_id) [Buy now](https://quickbooks.intuit.com/pricing/?cid=cdist_wblog_id) [Buy now](https://quickbooks.intuit.com/pricing/?cid=cdist_wblog_id) [![QuickBooks](<data:image/svg+xml,%3csvg xmlns='http://www.w3.org/2000/svg' fill='none' viewBox='0 0 36 36'%3e%3cpath fill='%232CA01C' d='M18 36c9.9411 0 18-8.0589 18-18 0-9.94114-8.0589-18-18-18C8.05886 0 0 8.05886 0 18c0 9.9411 8.05886 18 18 18Z'/%3e%3cpath fill='white' d='M12.0002 11c-3.86797 0-6.99996 3.136-6.99996 7 0 3.868 3.13199 7 6.99996 7h1.0001v-2.6h-1.0001c-2.42798 0-4.39995-1.972-4.39995-4.4 0-2.428 1.97197-4.4 4.39995-4.4h2.4041v13.6c0 1.436 1.1639 2.6 2.5999 2.6V11h-5.004ZM24.0038 25c3.868 0 6.9999-3.1361 6.9999-7 0-3.868-3.1319-7-6.9999-7h-1.0001v2.5999h1.0001c2.428 0 4.3999 1.9721 4.3999 4.4001s-1.9719 4.3999-4.3999 4.3999h-2.4041V8.79997c0-1.43602-1.1639-2.60002-2.5999-2.60002V25h5.004Z'/%3e%3c/svg%3e>)](https://quickbooks.intuit.com/) [Explore Products](https://quickbooks.intuit.com/products/?cid=cdist_wblog_products_nav) QuickBooks Blog ![Search icon](<data:image/svg+xml,%3c%3fxml version='1.0' encoding='UTF-8'%3f%3e%3csvg width='29' height='29' viewBox='0 0 29 29' fill='none' xmlns='http://www.w3.org/2000/svg'%3e %3cpath d='M11.7732 23.5302C14.1194 23.5302 16.3692 22.8224 18.2975 21.5354L25.1111 28.3243C25.9789 29.2252 27.4252 29.2252 28.3251 28.3243C29.225 27.4556 29.225 26.0077 28.3251 25.1068L21.5115 18.3178C25.1111 12.9446 23.697 5.64083 18.2975 2.00503C12.8981 -1.63076 5.63458 -0.182877 2.00281 5.22255C-1.62895 10.628 -0.182675 17.8996 5.21676 21.5354C7.17727 22.8545 9.45918 23.5302 11.7732 23.5302ZM11.7732 2.74506C16.7548 2.74506 20.8044 6.79913 20.8044 11.7863C20.8044 16.7734 16.7548 20.8275 11.7732 20.8275C6.7916 20.8275 2.77416 16.7734 2.77416 11.7863C2.77416 6.79913 6.7916 2.74506 11.7732 2.74506Z' fill='%232CA01C' /%3e%3c/svg%3e>) - 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A profit and loss statement is a financial statement that shows a company’s revenue and expenses for a given period of time. You can create a simple profit and loss statement by using a template and entering your business’s information. [![ChatGPT](https://upload.wikimedia.org/wikipedia/commons/0/04/ChatGPT_logo.svg)](https://chat.openai.com/?q=Using%20the%20QuickBooks%20article%20%22What%20Is%20a%20Profit%20and%20Loss%20Statement%3F%22%20%28https%3A//quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/%29%2C%20summarize%20the%20key%20points%20including%20what%20a%20profit%20and%20loss%20statement%20is%2C%20why%20it%20matters%20for%20business%20decision-making%2C%20and%20how%20to%20prepare%20one.%20Include%20an%20example%20with%20simple%20sample%20numbers.%20End%20by%20explaining%20how%20QuickBooks%20can%20help%20automate%20and%20simplify%20creating%2C%20updating%2C%20and%20interpreting%20profit%20and%20loss%20statements%20compared%20to%20doing%20them%20manually%20in%20spreadsheets. "Open in ChatGPT") [![Claude AI](https://upload.wikimedia.org/wikipedia/commons/8/8a/Claude_AI_logo.svg)](https://claude.ai/new?q=Using%20the%20QuickBooks%20article%20%22What%20Is%20a%20Profit%20and%20Loss%20Statement%3F%22%20%28https%3A//quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/%29%2C%20summarize%20the%20key%20points%20including%20what%20a%20profit%20and%20loss%20statement%20is%2C%20why%20it%20matters%20for%20business%20decision-making%2C%20and%20how%20to%20prepare%20one.%20Include%20an%20example%20with%20simple%20sample%20numbers.%20End%20by%20explaining%20how%20QuickBooks%20can%20help%20automate%20and%20simplify%20creating%2C%20updating%2C%20and%20interpreting%20profit%20and%20loss%20statements%20compared%20to%20doing%20them%20manually%20in%20spreadsheets. 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"Open in Gemini") [![Grok AI](https://logowik.com/content/uploads/images/grok-ai1793.logowik.com.webp)](https://x.com/i/grok?text=Using%20the%20QuickBooks%20article%20%22What%20Is%20a%20Profit%20and%20Loss%20Statement%3F%22%20%28https%3A//quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/%29%2C%20summarize%20the%20key%20points%20including%20what%20a%20profit%20and%20loss%20statement%20is%2C%20why%20it%20matters%20for%20business%20decision-making%2C%20and%20how%20to%20prepare%20one.%20Include%20an%20example%20with%20simple%20sample%20numbers.%20End%20by%20explaining%20how%20QuickBooks%20can%20help%20automate%20and%20simplify%20creating%2C%20updating%2C%20and%20interpreting%20profit%20and%20loss%20statements%20compared%20to%20doing%20them%20manually%20in%20spreadsheets. "Open in Grok") A [profit and loss (P\&L) statement](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/) is the same as an [income statement](https://quickbooks.intuit.com/r/bookkeeping/income-statement-guide/). It’s a financial document that includes a company’s revenues and expenses. Business owners use the P\&L to understand how much money a company makes, which they can also quickly and easily do with accounting software. Knowing how to read a profit and loss sheet is key to making informed business decisions. It shows you where you might be able to cut costs. Let’s look at exactly what a P\&L is and why it’s important, and get a free profit and loss statement template to simplify your process. - [What is the format of a profit & loss (P\&L) statement?](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#format) - [How to do a profit and loss statement](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#howto) - [How to read a P\&L statement](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#read) - [Example of a profit and loss statement](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#example) - [Spend more time growing your business](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#spend) ![](https://i.ytimg.com/vi/nSGeKUO4HHE/sddefault.jpg) ![note icon](https://digitalasset.intuit.com/render/content/dam/intuit/sbseg/en_us/Blog/Graphic/Quick-answer-lightbulb-green.svg) Consider creating a quarterly profit and loss statement. This will help you see where your business stands throughout the year so you can adjust your strategies as needed. ## What is the format of a profit & loss (P\&L) statement? A profit and loss statement (P\&L) is a snapshot of a company's sales and expenses over a period of time. It shows company revenues, expenses, and net income over that period. The bottom line on a P\&L is net income, also known as profit or loss. The profit and loss formula is: Revenue - Expenses = Profit or loss There are many ways to format a P\&L statement, but all versions include the same basic information. Sales are at the top of the statement, while expenses appear below. The profit or loss is the difference between the two. Let’s take a closer look at the main components of a profit and loss statement. ![The layout of a profit and loss statement.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Graphic/profit-and-loss-statement-image1-us-en.png) ### Revenue Revenue is the money your business makes from selling goods or services. It’s the very first line on the profit and loss statement. Note there are two types of revenue: - Gross revenue, or total revenue or sales, is the total amount you make before accounting for discounts, returns, or expenses. - Net revenue, also known as net sales, is the money you make after deducting discounts and returns. Note that net revenue is gross revenue minus discounts and returns. ### Expenses The expenses of a business include all the costs to generate revenue. Cost of goods sold (COGS) is the cost of materials and labor a company uses to make a product or service. It’s also known as the cost of sales. The costs can include raw materials or direct wages for employees. But also certain overhead costs, such as utilities. COGS are expenses that show up on the top part of the P\&L before gross profit. [Gross profit](https://quickbooks.intuit.com/r/bookkeeping/gross-profit/) is the money you make from sales after subtracting your cost of goods sold, using the formula: Gross profit = Net revenue - Cost of goods sold Other expenses can be operating or non-operating. [Operating expenses](https://quickbooks.intuit.com/r/accounting/operating-costs/)are the costs of running your business. While COGS are for making a product, operating expenses are the costs to support that process. Operating expenses include: - Rent - Marketing costs - Salaries for admin staff - [Depreciation](https://quickbooks.intuit.com/r/bookkeeping/depreciation/) - Licensing fees Non-operating expenses are costs not part of your core operations. These include taxes, fines, legal fees, and interest. Non-operating expenses include anything unlikely to happen again. For example, losses due to shutting down a business operation. [![A person sitting at a desk with a laptop computer.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Headshots/qbl-allison-bookkeeper-cta-image-us-en.jpg)](https://quickbooks.intuit.com/oa/expert-help/) ### Run your business with confidence Get help and guidance when you need it from real QuickBooks experts.\* [Start here](https://quickbooks.intuit.com/oa/expert-help/) ### Income Income is how much money you make in your business. There are two key types of income—operating and [net income](https://quickbooks.intuit.com/r/bookkeeping-processes/net-income-formula/). Operating income is a business's income from its core operations. It excludes non-operating expenses, such as taxes or interest expenses. This type of income measures how well a company generates money from its main business. The formula for operating income is: Operating income = Gross profit - Operating expenses Net income is your bottom line—the last item on your P\&L. It's the money left after subtracting all expenses. Net income = revenue - COGS - Operating expenses - Non-operating expenses Net income comes after both operating and non-operating expenses on the P\&L. It’s a measure of the money left over for shareholders or owners. ## How to do a profit and loss statement The P\&L will include three key components—revenue, expenses, and income. These components help you understand where your business is doing well, where you may be able to cut costs, and how much you’re earning after covering those expenses. Though you can put a profit and loss statement together from scratch, using a profit and loss statement template is far easier. For example, our template includes space for the three components and helps you organize your information in a usable way. Let’s look at how you can use the template to create a functional profit and loss statement for your business. [![Download our P\&L statement template.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Stock/download-profit-and-loss-statement-template-button-image-us-en.jpg)](https://digitalasset.intuit.com/render/content/dam/intuit/sbseg/en_us/Blog/Photography/Stock/profit-and-loss-statement-us-en.pdf) ### 1\. Start with revenue Determine what period you want to create a profit and loss statement for. This can be any period, but it’s generally best practice to put together a P\&L monthly to help identify trends. You’ll want to calculate your gross revenue ‌for that period and list it on the top line of your P\&L statement. ### 2\. Calculate your costs After accounting for all your revenues, group your expenses into one of three categories: - Cost of goods sold (COGS) - Operating expenses - Non-operating expenses COGS are all the costs of making a product. For a service business that doesn’t make a physical product, COGS can include labor for employees performing the service. For example, a hair stylist’s COGS would include the time spent styling hair. You'll group all the other business costs as operating expenses. Non-operating expenses should be everything that's left. This will be the money you spend on things like taxes and interest. - For example, a hairstylist would have operating expenses like cosmetic supplies, insurance, and marketing. Non-operating expenses may include interest on business debt or writing off unsellable inventory. ### 3\. Figure out your net income This is the last step. It's subtracting all the expenses from your revenue. The net income will either be a profit or a loss—or, in very rare cases, zero. Your net income gives you a stronger picture of your business’s financial standing. Keep in mind that your profit and loss statement only gives you insight into the income you’re earning after accounting for expenses. You’ll also want to refer to your [balance sheet](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-balance-sheet/) that accounts for your liabilities to gain a full picture of how your business is doing. ![The differences between profit and loss statements and balance sheets.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Stock/profit-and-loss-statement-vs-balance-sheet-image-us-en.jpg) ## How to read a P\&L statement Once you’ve put together your profit and loss statement, it’s useful to analyze it. It’ll show whether you’re profitable or not. But it also allows you to identify areas to save or reduce spending. ### Determine profitability Profitability measures how much a business earns compared to its expenses. There are different ways to measure profitability. Two common measures of profitability are gross profit margin and net profit margin. Say a window maker’s revenue was \$500,000 last year. They spent \$300,000 on COGS to make the windows. Net income for the year was \$40,000. The company's gross profit margin is 40% or (\$500,000 - \$300,000) / \$500,000. Its net profit margin is 8% or \$40,000 / \$500,000. Many small businesses aim for a net profit margin of 10%, although this will depend on your industry. ![Key profitability ratios for gross profit margin and net profit margin explained.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Graphic/gross-profit-margin-vs-net-profit-margin-image1-us-en.png) ### Assess financial ratios Beyond profitability, the P\&L can also help you calculate other ratios with help from the [balance sheet](https://quickbooks.intuit.com/r/accounting/balance-sheet-vs-profit-and-loss-statement/). These are the ratios you’ll want to look at: - Efficiency ratios: These assess how well a company uses its resources. - [Accounts receivable turnover ratios](https://quickbooks.intuit.com/r/accounting/calculate-accounts-receivable-turnover-ratio/): These show how well your business manages the money customers owe you for products or services you’ve provided. - [Inventory turnover ratios](https://quickbooks.intuit.com/accounting/inventory/turnover/#inventory-turnover): These tell you how well your company manages its inventory. You can also use an inventory turnover calculator to help you see how your business is doing. ### Comparing P\&L statements P\&L statements are most useful when comparing them to previous periods because they allow you to track progress over time. They’re also useful when it comes to setting goals for your business. ![note icon](https://digitalasset.intuit.com/render/content/dam/intuit/sbseg/en_us/Blog/Graphic/Quick-answer-lightbulb-green.svg) You can also compare your P\&L to companies in your industry. This will help you determine where you stand relative to other businesses. ## Example of a profit and loss statement There are two ways to set up your P\&L statement: the single-step and multistep methods. Both work differently and offer different benefits, so let’s take a closer look at them in practice. ### The single-step method The single-step method of putting together a P\&L statement is simple and straightforward. It involves only one calculation: subtracting all expenses from revenues to get net income. This method doesn't separate revenues and expenses into different categories. ![Table](https://datawrapper.dwcdn.net/WL28g/full.png) The disadvantage of the single-step method is that it doesn't provide as much detail. This makes it difficult for businesses to analyze their [profitability](https://quickbooks.intuit.com/r/pricing-strategy/4-ways-to-measure-your-profitability/). However, the single-step method is quick and easy to calculate. It works for businesses that don’t have many expenses. ### The multistep method The multistep method involves more calculations and the classification of expenses. But it makes assessing your company's profitability easier. It groups the cost to make products or services as costs of goods sold (COGS). The remaining expenses are either operating or non-operating. Here’s a simple profit and loss statement using the multistep method, which is what many businesses use: ![Table](https://datawrapper.dwcdn.net/kQ92N/full.png) ## Spend more time growing your business As a small business owner, you need to be aware of your company’s financial health. One of the best ways to do this is to analyze your profit and loss statement and assess key [financial KPIs](https://quickbooks.intuit.com/r/financial-management/5-financial-kpis-gauge-business-health/). Use the free profit and loss statement template to learn more about your company’s financial situation. Regularly reviewing your P\&L will give you a better idea of how your business is doing. [Accounting software](https://quickbooks.intuit.com/online/) like QuickBooks Online makes creating your P\&L and other financial statements easy, as well as assessing your spending. Share Share ![A person wearing glasses and a red sweater.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Headshots/siege-marshall-hargrave-image-us-en.jpg) [Marshall Hargrave](https://quickbooks.intuit.com/r/author/marshall-hargrave/) Marshall Hargrave is a financial writer with nearly two decades of experience in finance, investing, and tax industries. He’s helped create and edit content for the likes of Investopedia, RobinHood, Fortune, and Yahoo! Finance. He’s also supported startups and small businesses with accounting, bookkeeping, and budgeting and worked with various finance organizations like the Consumer Bankers Association and the National Venture Capital Association. Marshall is a former Securities & Exchange Commission-registered investment adviser with a bachelor's degree in finance from Appalachian State University. ## Recommended for you [![An illustration of a business owner getting documents together for an accountant.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Graphic/what-to-give-accountant-for-taxes-image-us-en.png)](https://quickbooks.intuit.com/r/taxes/what-do-i-need-to-give-my-accountant-for-small-business-taxes/) [taxes 13 documents to give your accountant for small business taxes January 21, 2026](https://quickbooks.intuit.com/r/taxes/what-do-i-need-to-give-my-accountant-for-small-business-taxes/) [![A business owner working on accounts payable.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Stock/accounts-payable-hero-image-us-en.jpg)](https://quickbooks.intuit.com/r/bookkeeping/accounts-payable/) [Bookkeeping The benefits of accounts payable: A strategic guide to improving cash flow February 6, 2026](https://quickbooks.intuit.com/r/bookkeeping/accounts-payable/) [![An illustration of bookkeeping tools](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Graphic/bookkeeping-tips-hero.png)](https://quickbooks.intuit.com/r/bookkeeping/13-bookkeeping-tips/) [Bookkeeping 13 bookkeeping tips every small business can benefit from October 13, 2025](https://quickbooks.intuit.com/r/bookkeeping/13-bookkeeping-tips/) ![Mail icon](<data:image/svg+xml,%3csvg width='44' height='44' viewBox='0 0 44 44' fill='none' xmlns='http://www.w3.org/2000/svg'%3e %3crect width='44' height='44' rx='22' fill='%2307C4D9'/%3e %3cpath d='M29 14H15C14.2044 14 13.4413 14.3161 12.8787 14.8787C12.3161 15.4413 12 16.2044 12 17V27C12 27.7956 12.3161 28.5587 12.8787 29.1213C13.4413 29.6839 14.2044 30 15 30H29C29.7956 30 30.5587 29.6839 31.1213 29.1213C31.6839 28.5587 32 27.7956 32 27V17C32 16.2044 31.6839 15.4413 31.1213 14.8787C30.5587 14.3161 29.7956 14 29 14V14ZM15 16H29C29.2652 16 29.5196 16.1054 29.7071 16.2929C29.8946 16.4804 30 16.7348 30 17V18.279L22.316 20.841C22.1107 20.9085 21.8893 20.9085 21.684 20.841L14 18.279V17C14 16.7348 14.1054 16.4804 14.2929 16.2929C14.4804 16.1054 14.7348 16 15 16V16ZM29 28H15C14.7348 28 14.4804 27.8946 14.2929 27.7071C14.1054 27.5196 14 27.2652 14 27V20.387L21.051 22.738C21.6678 22.9424 22.3342 22.9424 22.951 22.738L30 20.387V27C30 27.2652 29.8946 27.5196 29.7071 27.7071C29.5196 27.8946 29.2652 28 29 28Z' fill='white'/%3e%3c/svg%3e>) ###### Get the latest to your inbox Subscribe No Thanks Important offers, pricing details and disclaimers - - This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. 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Readable Markdown	![A business owner looks at a profit and loss statement.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Graphic/what-is-a-profit-and-loss-statement-header-image-us-en.png) [Bookkeeping](https://quickbooks.intuit.com/r/bookkeeping/) ## What is a profit and loss (P\&L) statement: Definition, examples, and template Published on April 30, 2025 A profit and loss statement is a financial statement that shows a company’s revenue and expenses for a given period of time. You can create a simple profit and loss statement by using a template and entering your business’s information. A [profit and loss (P\&L) statement](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/) is the same as an [income statement](https://quickbooks.intuit.com/r/bookkeeping/income-statement-guide/). It’s a financial document that includes a company’s revenues and expenses. Business owners use the P\&L to understand how much money a company makes, which they can also quickly and easily do with accounting software. Knowing how to read a profit and loss sheet is key to making informed business decisions. It shows you where you might be able to cut costs. Let’s look at exactly what a P\&L is and why it’s important, and get a free profit and loss statement template to simplify your process. - [What is the format of a profit & loss (P\&L) statement?](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#format) - [How to do a profit and loss statement](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#howto) - [How to read a P\&L statement](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#read) - [Example of a profit and loss statement](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#example) - [Spend more time growing your business](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-profit-and-loss-statement/#spend) ![](https://i.ytimg.com/vi/nSGeKUO4HHE/sddefault.jpg) ![note icon](https://digitalasset.intuit.com/render/content/dam/intuit/sbseg/en_us/Blog/Graphic/Quick-answer-lightbulb-green.svg) Consider creating a quarterly profit and loss statement. This will help you see where your business stands throughout the year so you can adjust your strategies as needed. ## What is the format of a profit & loss (P\&L) statement? A profit and loss statement (P\&L) is a snapshot of a company's sales and expenses over a period of time. It shows company revenues, expenses, and net income over that period. The bottom line on a P\&L is net income, also known as profit or loss. The profit and loss formula is: Revenue - Expenses = Profit or loss There are many ways to format a P\&L statement, but all versions include the same basic information. Sales are at the top of the statement, while expenses appear below. The profit or loss is the difference between the two. Let’s take a closer look at the main components of a profit and loss statement. ![The layout of a profit and loss statement.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Graphic/profit-and-loss-statement-image1-us-en.png) ### Revenue Revenue is the money your business makes from selling goods or services. It’s the very first line on the profit and loss statement. Note there are two types of revenue: - Gross revenue, or total revenue or sales, is the total amount you make before accounting for discounts, returns, or expenses. - Net revenue, also known as net sales, is the money you make after deducting discounts and returns. Note that net revenue is gross revenue minus discounts and returns. ### Expenses The expenses of a business include all the costs to generate revenue. Cost of goods sold (COGS) is the cost of materials and labor a company uses to make a product or service. It’s also known as the cost of sales. The costs can include raw materials or direct wages for employees. But also certain overhead costs, such as utilities. COGS are expenses that show up on the top part of the P\&L before gross profit. [Gross profit](https://quickbooks.intuit.com/r/bookkeeping/gross-profit/) is the money you make from sales after subtracting your cost of goods sold, using the formula: Gross profit = Net revenue - Cost of goods sold Other expenses can be operating or non-operating. [Operating expenses](https://quickbooks.intuit.com/r/accounting/operating-costs/)are the costs of running your business. While COGS are for making a product, operating expenses are the costs to support that process. Operating expenses include: - Rent - Marketing costs - Salaries for admin staff - [Depreciation](https://quickbooks.intuit.com/r/bookkeeping/depreciation/) - Licensing fees Non-operating expenses are costs not part of your core operations. These include taxes, fines, legal fees, and interest. Non-operating expenses include anything unlikely to happen again. For example, losses due to shutting down a business operation. [![A person sitting at a desk with a laptop computer.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Headshots/qbl-allison-bookkeeper-cta-image-us-en.jpg)](https://quickbooks.intuit.com/oa/expert-help/) ### Run your business with confidence Get help and guidance when you need it from real QuickBooks experts.\* ### Income Income is how much money you make in your business. There are two key types of income—operating and [net income](https://quickbooks.intuit.com/r/bookkeeping-processes/net-income-formula/). Operating income is a business's income from its core operations. It excludes non-operating expenses, such as taxes or interest expenses. This type of income measures how well a company generates money from its main business. The formula for operating income is: Operating income = Gross profit - Operating expenses Net income is your bottom line—the last item on your P\&L. It's the money left after subtracting all expenses. Net income = revenue - COGS - Operating expenses - Non-operating expenses Net income comes after both operating and non-operating expenses on the P\&L. It’s a measure of the money left over for shareholders or owners. ## How to do a profit and loss statement The P\&L will include three key components—revenue, expenses, and income. These components help you understand where your business is doing well, where you may be able to cut costs, and how much you’re earning after covering those expenses. Though you can put a profit and loss statement together from scratch, using a profit and loss statement template is far easier. For example, our template includes space for the three components and helps you organize your information in a usable way. Let’s look at how you can use the template to create a functional profit and loss statement for your business. [![Download our P\&L statement template.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Stock/download-profit-and-loss-statement-template-button-image-us-en.jpg)](https://digitalasset.intuit.com/render/content/dam/intuit/sbseg/en_us/Blog/Photography/Stock/profit-and-loss-statement-us-en.pdf) ### 1\. Start with revenue Determine what period you want to create a profit and loss statement for. This can be any period, but it’s generally best practice to put together a P\&L monthly to help identify trends. You’ll want to calculate your gross revenue ‌for that period and list it on the top line of your P\&L statement. ### 2\. Calculate your costs After accounting for all your revenues, group your expenses into one of three categories: - Cost of goods sold (COGS) - Operating expenses - Non-operating expenses COGS are all the costs of making a product. For a service business that doesn’t make a physical product, COGS can include labor for employees performing the service. For example, a hair stylist’s COGS would include the time spent styling hair. You'll group all the other business costs as operating expenses. Non-operating expenses should be everything that's left. This will be the money you spend on things like taxes and interest. - For example, a hairstylist would have operating expenses like cosmetic supplies, insurance, and marketing. Non-operating expenses may include interest on business debt or writing off unsellable inventory. ### 3\. Figure out your net income This is the last step. It's subtracting all the expenses from your revenue. The net income will either be a profit or a loss—or, in very rare cases, zero. Your net income gives you a stronger picture of your business’s financial standing. Keep in mind that your profit and loss statement only gives you insight into the income you’re earning after accounting for expenses. You’ll also want to refer to your [balance sheet](https://quickbooks.intuit.com/r/bookkeeping/what-is-a-balance-sheet/) that accounts for your liabilities to gain a full picture of how your business is doing. ![The differences between profit and loss statements and balance sheets.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Stock/profit-and-loss-statement-vs-balance-sheet-image-us-en.jpg) ## How to read a P\&L statement Once you’ve put together your profit and loss statement, it’s useful to analyze it. It’ll show whether you’re profitable or not. But it also allows you to identify areas to save or reduce spending. ### Determine profitability Profitability measures how much a business earns compared to its expenses. There are different ways to measure profitability. Two common measures of profitability are gross profit margin and net profit margin. Say a window maker’s revenue was \$500,000 last year. They spent \$300,000 on COGS to make the windows. Net income for the year was \$40,000. The company's gross profit margin is 40% or (\$500,000 - \$300,000) / \$500,000. Its net profit margin is 8% or \$40,000 / \$500,000. Many small businesses aim for a net profit margin of 10%, although this will depend on your industry. ![Key profitability ratios for gross profit margin and net profit margin explained.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Graphic/gross-profit-margin-vs-net-profit-margin-image1-us-en.png) ### Assess financial ratios Beyond profitability, the P\&L can also help you calculate other ratios with help from the [balance sheet](https://quickbooks.intuit.com/r/accounting/balance-sheet-vs-profit-and-loss-statement/). These are the ratios you’ll want to look at: - Efficiency ratios: These assess how well a company uses its resources. - [Accounts receivable turnover ratios](https://quickbooks.intuit.com/r/accounting/calculate-accounts-receivable-turnover-ratio/): These show how well your business manages the money customers owe you for products or services you’ve provided. - [Inventory turnover ratios](https://quickbooks.intuit.com/accounting/inventory/turnover/#inventory-turnover): These tell you how well your company manages its inventory. You can also use an inventory turnover calculator to help you see how your business is doing. ### Comparing P\&L statements P\&L statements are most useful when comparing them to previous periods because they allow you to track progress over time. They’re also useful when it comes to setting goals for your business. ![note icon](https://digitalasset.intuit.com/render/content/dam/intuit/sbseg/en_us/Blog/Graphic/Quick-answer-lightbulb-green.svg) You can also compare your P\&L to companies in your industry. This will help you determine where you stand relative to other businesses. ## Example of a profit and loss statement There are two ways to set up your P\&L statement: the single-step and multistep methods. Both work differently and offer different benefits, so let’s take a closer look at them in practice. ### The single-step method The single-step method of putting together a P\&L statement is simple and straightforward. It involves only one calculation: subtracting all expenses from revenues to get net income. This method doesn't separate revenues and expenses into different categories. The disadvantage of the single-step method is that it doesn't provide as much detail. This makes it difficult for businesses to analyze their [profitability](https://quickbooks.intuit.com/r/pricing-strategy/4-ways-to-measure-your-profitability/). However, the single-step method is quick and easy to calculate. It works for businesses that don’t have many expenses. ### The multistep method The multistep method involves more calculations and the classification of expenses. But it makes assessing your company's profitability easier. It groups the cost to make products or services as costs of goods sold (COGS). The remaining expenses are either operating or non-operating. Here’s a simple profit and loss statement using the multistep method, which is what many businesses use: ## Spend more time growing your business As a small business owner, you need to be aware of your company’s financial health. One of the best ways to do this is to analyze your profit and loss statement and assess key [financial KPIs](https://quickbooks.intuit.com/r/financial-management/5-financial-kpis-gauge-business-health/). Use the free profit and loss statement template to learn more about your company’s financial situation. Regularly reviewing your P\&L will give you a better idea of how your business is doing. [Accounting software](https://quickbooks.intuit.com/online/) like QuickBooks Online makes creating your P\&L and other financial statements easy, as well as assessing your spending. ![A person wearing glasses and a red sweater.](https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Headshots/siege-marshall-hargrave-image-us-en.jpg) [Marshall Hargrave](https://quickbooks.intuit.com/r/author/marshall-hargrave/) Marshall Hargrave is a financial writer with nearly two decades of experience in finance, investing, and tax industries. He’s helped create and edit content for the likes of Investopedia, RobinHood, Fortune, and Yahoo! Finance. He’s also supported startups and small businesses with accounting, bookkeeping, and budgeting and worked with various finance organizations like the Consumer Bankers Association and the National Venture Capital Association. Marshall is a former Securities & Exchange Commission-registered investment adviser with a bachelor's degree in finance from Appalachian State University. ## Recommended for you ![Mail icon](<data:image/svg+xml,%3csvg width='44' height='44' viewBox='0 0 44 44' fill='none' xmlns='http://www.w3.org/2000/svg'%3e %3crect width='44' height='44' rx='22' fill='%2307C4D9'/%3e %3cpath d='M29 14H15C14.2044 14 13.4413 14.3161 12.8787 14.8787C12.3161 15.4413 12 16.2044 12 17V27C12 27.7956 12.3161 28.5587 12.8787 29.1213C13.4413 29.6839 14.2044 30 15 30H29C29.7956 30 30.5587 29.6839 31.1213 29.1213C31.6839 28.5587 32 27.7956 32 27V17C32 16.2044 31.6839 15.4413 31.1213 14.8787C30.5587 14.3161 29.7956 14 29 14V14ZM15 16H29C29.2652 16 29.5196 16.1054 29.7071 16.2929C29.8946 16.4804 30 16.7348 30 17V18.279L22.316 20.841C22.1107 20.9085 21.8893 20.9085 21.684 20.841L14 18.279V17C14 16.7348 14.1054 16.4804 14.2929 16.2929C14.4804 16.1054 14.7348 16 15 16V16ZM29 28H15C14.7348 28 14.4804 27.8946 14.2929 27.7071C14.1054 27.5196 14 27.2652 14 27V20.387L21.051 22.738C21.6678 22.9424 22.3342 22.9424 22.951 22.738L30 20.387V27C30 27.2652 29.8946 27.5196 29.7071 27.7071C29.5196 27.8946 29.2652 28 29 28Z' fill='white'/%3e%3c/svg%3e>) ###### Get the latest to your inbox No Thanks ### Looking for something else? ### QuickBooks From big jobs to small tasks, we've got your business covered. ### Firm of the Future Topical articles and news from top pros and Intuit product experts. ### QuickBooks Support Get help with QuickBooks. 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