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Raw Queries and Responses

1. Shard Calculation

Query:

Response:

Calculated Shard: 106 (from laksa052)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa106.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://www.zenbusiness.com/profit-and-loss-statement/\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.zenbusiness.com/profit-and-loss-statement/\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.zenbusiness.com\/profit-and-loss-statement\/","crawl_time":1775679825,"first_indexed_time":1619850616,"http_code":200,"src_unparsed":"com,zenbusiness!www,\/profit-and-loss-statement\/ s443","src_root_hash":"10548661155711675906","history_drop_reason":null,"meta_title":"Create Your Profit and Loss Statement in 4 Simple Steps | ZenBusiness","meta_descriptions":["A profit and loss statement is a key indicator of your business’s financial health. This guide explains how to create a P&L statement."],"attrs_boilerpipe_text":"Learn the four steps how to create your profit and loss statement in this guide below.\nLast Updated: July 23, 2025\nWhether you’re working as a freelance consultant or managing your own plumbing company, you should know how to create a profit and loss (P&L) statement. Many small business owners and freelancers are hesitant to invest their energy into learning about such topics. After all, you became your own boss so that you can do work you’re passionate about, right? Business finance likely isn’t your main passion in life. However, a basic knowledge of accounting can make or break your business. Read more about why a Profit and Loss Statement is good for the\nself employed\nWhat is a Profit and Loss (P&L) Statement?\nAn P&L statement is one of the most important business financial statements. You can use this statement to track revenues and expenses so that you can determine the operating performance of your business over a period of time. Small business owners use these statements to find out which areas of their business are over or under budget.\nPinpointing Essential Items\nThese statements allow you to pinpoint specific items that are causing unexpected expenditures, such as cell phone use, advertising, or supply expenses. P&L statements can also track dramatic increases in product returns or cost of goods sold as a percentage of sales, and can be used to determine income tax liability.\nLenders and Investors Require Them\nP&L statements, along with balance sheets, are the most basic elements required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contained therein to determine credit limits. Your P&L statement could decide if you get a loan or not. Lenders and investors will also want to see future projected financial statements called pro forma income statements, pro forma balance sheets and pro forma cash flows.\n4 Steps for Creating a Profit and Loss Statement\nThe thought of financial paperwork might make you cringe, especially if you’re not a big fan of math. Don’t stress because creating a P&L statement is pretty easy. There are a few quick steps you need to follow. There is even accounting software like QuickBooks to help.\nHere are the four main steps:\nEstablish your revenue figures.\nCalculate your operating profit\/loss.\nFactor in additional revenue to determine your EBITDA.\nSubtract EBITDA from interest, taxes, depreciation, and amortization.\nStep 1: Establish Your Revenue Figures\nRevenue encompasses any income your business generates. It includes the total sales that your business makes, whether of products or services. It also includes money that your business received from other avenues, such as selling equipment or through a tax refund. Create a list of these income streams and amounts and tally them up.\nWhat if You Have no Revenue Yet?\nIf you have just started your business, you may not have revenue yet. In this case, create an estimate. How much money do you expect to make in your first accounting period? You may already have some orders lined up. Forecasting your expected profits and losses will provide a benchmark to measure future business successes and failures.\nEstablishing Revenue Figures\nEstablish your revenue figures in the given time frame for which you’re calculating a P&L statement. So, if you’re calculating a P&L statement for Q1, you have to input all your revenue from January, February, and March.\nStep 2: Calculate Your Operating Profit\/Loss\nWith your revenue defined, you can calculate your operating profit\/loss. There is a precise formula to do this:\n(Revenue – Cost of Goods Sold) – Operating Expenses = Operating Profit\/Loss\nDoes that look like gibberish to you? Read on as we define each of those terms and break down the formula for you.\nRevenue\nWe covered it in the section above, but here’s a quick reminder: Your revenue refers to all the income your business has generated in a specified time frame. This includes the sale of goods and services and other income streams, like selling old business equipment.\nCost of Goods Sold (COGS)\nThe cost of goods sold (COGS) refers to materials costs related to the production or sale of your business product or service. It could cover materials costs, for example, or manpower costs related to manufacturing.\nFor instance, if you run a coffee shop and sell a to-go coffee for $3.50, you aren’t making a full $3.50 off that sale. You have to subtract costs like the cost of coffee beans and the to-go cup. Another example: If you sell a product that you don’t manufacture yourself, you have to factor in the supplier costs.\nSometimes referred to as “direct costs,” COGS \nonly\n cover expenses related to the sale or production of your given product or service. They don’t cover indirect costs, like accounting, rent, and marketing. Find out more about the difference between direct and indirect costs.\nGross Profit\nTo get your gross profit, subtract your COGS (direct costs) from your revenue:\n(Revenue – COGS) = Gross Profit\nOperating Expenses\nFinally, you have to calculate your operating expenses. These are funds required to keep your business running on a day-to-day basis. Operating expenses include:\nSales salaries: These are the salaries plus bonuses and commissions paid to your sales staff.\nCollateral and promotions: Collateral fees are expenses incurred in the creation or purchase of printed sales materials used by your sales staff in marketing and selling your product. Promotion fees include any product samples and giveaways used to promote or sell your product.\nAdvertising: These represent all costs involved in creating and placing print or multimedia advertising.\nOther sales costs: These include any other costs associated with selling your product. They may include travel, client meals, sales meetings, equipment rental for presentations, copying, or miscellaneous printing costs.\nOffice salaries: These are the salaries of full- and part-time office personnel.\nRent: This is the fee incurred to rent or lease office or industrial space.\nUtilities: These include costs for heating, air conditioning, electricity, Internet, and phone usage incurred in connection with your business.\nDepreciation: Depreciation is an annual expense that takes into account the loss in value of equipment used in your business. Some examples of equipment that may be subject to depreciation include computers, office furniture, automobiles, and buildings that you own. If you don’t understand depreciation, don’t worry; I will explain it more carefully in a separate section.\nOther overhead costs: Expense items that do not fall into any of the above categories or cannot be clearly associated with a particular product or function are considered to be other overhead costs. These types of expenses may include insurance, office supplies, or cleaning services.\nTo complete the formula and get your operating profit\/loss, you subtract your total operating expenses from your gross profit. Here’s the formula:\n(Revenue – COGS) – Operating Expenses = Operating Profit\/Loss\nStep 3: Factor in Additional Revenue to Determine Your EBITDA\nEBITDA stands for “earnings before interest, taxes, depreciation, and amortization.” This is another measure of profitability. Depreciation refers to any reduction in the value of your business’s assets, such as equipment or machinery. Amortization refers to an accounting technique that may be used to decrease the book value of an intangible asset or loan over a defined period.\nA rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. However, precisely calculating and factoring in depreciation and amortization requires advanced accounting experience, so at this point, it’s best to turn to a professional.\nStep 4: Subtract EBITDA from interest, taxes, depreciation, and amortization\nFinally, to calculate your operating profit\/loss, you must subtract the EBITDA from interest, taxes, depreciation, and amortization. Here’s the formula:\nNet Profit\/Loss = EBITDA – (Interest + Taxes + Depreciation)\nAgain, at this point, you’re likely best off leaving the job in the hands of an accountant or bookkeeper. Miscalculating some of these points, like depreciation, can have implications for income taxes. The \nInternal Revenue Service\n (IRS) has guidelines governing depreciation of business vehicles, for example, which a skilled tax professional will be well-acquainted with.\nSample Business Profit and Loss Statement Template\nGoing through an example profit and loss financial report can help clarify the process. Here, we take you through a scenario. Say you work as a freelance graphic designer. You’ve just finished your first quarter of business and want to create a profit and loss report. You follow the steps above.\nFirst, you need to establish your revenue. You sold $18,750 worth of graphic design services in your first three months as a freelancer. You also sold an old computer that you no longer used for work, bringing in another $250. In total, your revenue for the quarter was $19,000.\nHere’s how your P&L balance sheet looks so far:\nSales, Services: $18,750\nSales, Other: $250\nTotal Sales \n$19,000\nOperating Profit\/Loss\nNext, you want to calculate your operating profit\/loss. You calculate your COGS (design software, printing production costs, paper costs, etc.) and see they added up to $2,000. You subtract that from your revenue to get a total of $17,000. That’s your gross profit. Next, you calculate your operating expenses. So far, your P&L statement looks like this:\nSales, Services: $18,750\nSales, Other: $250\nTotal Sales \n$19,000\nCost of Goods Sold: $2,000\nGross Profit:\n \n$17,000\nOperating Expenses\nNext comes operating expenses. You paid $3,000 for rent on your office space and $300 for utilities. You don’t have any employees yet, so you don’t have payroll expenses. Since your business is new, you don’t have depreciation and amortization costs to account for yet. Here’s what you’ve got now:\nSales, Services: $18,750\nSales, Other: $250\nTotal Sales \n$19,000\nCost of Goods Sold: $2,000\nGross Profit:\n \n$17,000\nOperating Expenses\nPayroll: $0\nRent: $3,000\nUtilities: $300\nDepreciation and Amortization: $0\nTotal Operating Expenses: $3,300\nCalculating EBITDA\nNow, a rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. So, that’s $19,000 (total sales = total revenue) minus $2,000 minus $3,300, equaling $13,700.\nSales, Services: $18,750\nSales, Other: $250\nTotal Sales \n$19,000\nCost of Goods Sold: $2,000\nGross Profit:\n \n$17,000\nOperating Expenses\nPayroll: $0\nRent: $3,000\nUtilities: $300\nDepreciation and Amortization: $0\nTotal Operating Expenses: $3,300\nEBIT\/Operating Profit \n$13,700\nInterest, Taxes, and Depreciation\nA bookkeeping professional can then factor in interest, taxes, and depreciation to complete your profit and loss statement using the formula: Net Profit\/Loss = EBITDA – (Interest + Taxes + Depreciation). The final statement with all line items accounted for might look something like this:\nSales, Services:                                                    $18,750\nSales, Other:                                                                $250\nTotal Sales                                                              \n$19,000\nCost of Goods Sold:                                             $2,000\nGross Profit:\n                                                         \n$17,000\nOperating Expenses\nPayroll:                                                                                  $0\nRent:                                                                             $3,000\nUtilities:                                                                          $300\nDepreciation and Amortization:                            $0\nTotal Operating Expenses:                              $3,300\nEBIT \/ Operating Profit: \n  $13,700\nInterest Expense:                                                      $700\nEBT \/ Earnings Before Taxes:                      $13,000\nTaxes (assuming a 15% tax rate):                 $1,950\nNet Income:\n                                                          \n$11,050 \nWhat You Can Learn from a Profit and Loss Statement\nSo, what’s the point of all those numbers? Your P&L financial statement contains a lot of valuable data. Here are three things you can learn from a P&L statement:\nThe financial health of a business\nBusiness trends over time\nOperational changes or improvements needed\nFinancial Health of a Business\nSimply put, the P&L lets everyone know what the “bottom line” is. A positive profit statement means you are making money. However, if your gross profit is low or negative, it’s time to reassess your business model. Do you need to increase sales? Cut back on operating costs? Identifying the problems allows you to fix them.\nYour business’s financial health may also be of interest to external parties. For example, if you approach lenders to take out a loan for your business or take out a business credit card, such documentation can secure a favorable loan or interest rate. Demonstrating strong profit margins is also critical if you ever hope to sell your business.\nBusiness Trends Over Time\nTo truly excel, business owners need to look for trends in their business over time. A P&L statement helps identify important fluctuations that can inform smart business decisions. Say you run a holiday catering business, for example. Comparing your quarterly P&L statements, you see that Q4 is your strongest-performing quarter. That makes sense since Christmas, Thanksgiving, and New Year’s all fall in this period.\nHowever, you’re surprised to see that Q2 also performs strongly. Reviewing your records, you realize you cater to a lot of graduation parties in May and June. With this knowledge, you expand your Q2 marketing to capture more of this business.\nOperational Changes or Improvements Needed\nA significant portion of the P&L statement is dedicated to operational details. This can help you identify areas you’re spending too much on, such as rent or payroll. Alternatively, you may find that you can afford to invest more in operating expenses (in the interests of expansion). For example, if you started your small business from home but want to expand with your own office space, you can use your P&L statement to determine if this is feasible.\nWhat to Do Once You Have Your First Profit and Loss Statement\nNow, you know the basics of how to create a profit and loss statement. With the information you gain from your P&L statements, you can make important immediate business decisions, like whether you can afford to move to a larger office space or hire new employees. You can also make more “big picture” decisions, from planning your taxes to revamping your growth strategy.\nZenBusiness can support your business operations with educational resources. Get more tips on \nrunning a business\n.\nRecommended articles:\nUnderstanding Profit & Loss Statements\nHow to Calculate Profit Margins\nHow to Write a Business Problem Statement\nHow to Create a Pro Forma Cash Flow For Your Business\nHow to Create a Pro Forma Income Statement\nBusiness Expense Resources\nHow to Calculate Profit Margins\nHow to Create a Pro Forma Income Statement\nHow To Calculate Payroll\nWays to Calculate the Value of a Small Business\nWhat Expenses Can I Claim Working From Home\nHow to Automatically Track Tax Deductible Expenses\nReduce Recurring Business Expenses\nTax-Deductible Startup Expenses\nEmployee Expense Reports\nPersonal vs Business Expenses\nBest Practices for Business Expense Reports\nBusiness Expense vs. Capital Expenditure\nExpense Definition\nDisclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. 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Many small business owners and freelancers are hesitant to invest their energy into learning about such topics. After all, you became your own boss so that you can do work you’re passionate about, right? Business finance likely isn’t your main passion in life. However, a basic knowledge of accounting can make or break your business. Read more about why a Profit and Loss Statement is good for the [self employed](https:\/\/www.zenbusiness.com\/profit-loss-statement-self-employed\/)\n\n## What is a Profit and Loss (P\\&L) Statement?\nAn P\\&L statement is one of the most important business financial statements. You can use this statement to track revenues and expenses so that you can determine the operating performance of your business over a period of time. Small business owners use these statements to find out which areas of their business are over or under budget.\n\n### Pinpointing Essential Items\nThese statements allow you to pinpoint specific items that are causing unexpected expenditures, such as cell phone use, advertising, or supply expenses. P\\&L statements can also track dramatic increases in product returns or cost of goods sold as a percentage of sales, and can be used to determine income tax liability.\n\n### Lenders and Investors Require Them\nP\\&L statements, along with balance sheets, are the most basic elements required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contained therein to determine credit limits. Your P\\&L statement could decide if you get a loan or not. Lenders and investors will also want to see future projected financial statements called pro forma income statements, pro forma balance sheets and pro forma cash flows.\n\n## 4 Steps for Creating a Profit and Loss Statement\nThe thought of financial paperwork might make you cringe, especially if you’re not a big fan of math. Don’t stress because creating a P\\&L statement is pretty easy. There are a few quick steps you need to follow. There is even accounting software like QuickBooks to help.\n\nHere are the four main steps:\n\n- Establish your revenue figures.\n- Calculate your operating profit\/loss.\n- Factor in additional revenue to determine your EBITDA.\n- Subtract EBITDA from interest, taxes, depreciation, and amortization.\n### Step 1: Establish Your Revenue Figures\nRevenue encompasses any income your business generates. It includes the total sales that your business makes, whether of products or services. It also includes money that your business received from other avenues, such as selling equipment or through a tax refund. Create a list of these income streams and amounts and tally them up.\n\n#### What if You Have no Revenue Yet?\nIf you have just started your business, you may not have revenue yet. In this case, create an estimate. How much money do you expect to make in your first accounting period? You may already have some orders lined up. Forecasting your expected profits and losses will provide a benchmark to measure future business successes and failures.\n\n#### Establishing Revenue Figures\nEstablish your revenue figures in the given time frame for which you’re calculating a P\\&L statement. So, if you’re calculating a P\\&L statement for Q1, you have to input all your revenue from January, February, and March.\n\n### Step 2: Calculate Your Operating Profit\/Loss\nWith your revenue defined, you can calculate your operating profit\/loss. There is a precise formula to do this:\n\n(Revenue – Cost of Goods Sold) – Operating Expenses = Operating Profit\/Loss\n\nDoes that look like gibberish to you? Read on as we define each of those terms and break down the formula for you.\n\n#### Revenue\nWe covered it in the section above, but here’s a quick reminder: Your revenue refers to all the income your business has generated in a specified time frame. This includes the sale of goods and services and other income streams, like selling old business equipment.\n\n#### Cost of Goods Sold (COGS)\nThe cost of goods sold (COGS) refers to materials costs related to the production or sale of your business product or service. It could cover materials costs, for example, or manpower costs related to manufacturing.\n\nFor instance, if you run a coffee shop and sell a to-go coffee for \\$3.50, you aren’t making a full \\$3.50 off that sale. You have to subtract costs like the cost of coffee beans and the to-go cup. Another example: If you sell a product that you don’t manufacture yourself, you have to factor in the supplier costs.\n\nSometimes referred to as “direct costs,” COGS *only* cover expenses related to the sale or production of your given product or service. They don’t cover indirect costs, like accounting, rent, and marketing. Find out more about the difference between direct and indirect costs.\n\n#### Gross Profit\nTo get your gross profit, subtract your COGS (direct costs) from your revenue:\n\n(Revenue – COGS) = Gross Profit\n\n#### Operating Expenses\nFinally, you have to calculate your operating expenses. These are funds required to keep your business running on a day-to-day basis. Operating expenses include:\n\n- Sales salaries: These are the salaries plus bonuses and commissions paid to your sales staff.\n- Collateral and promotions: Collateral fees are expenses incurred in the creation or purchase of printed sales materials used by your sales staff in marketing and selling your product. Promotion fees include any product samples and giveaways used to promote or sell your product.\n- Advertising: These represent all costs involved in creating and placing print or multimedia advertising.\n- Other sales costs: These include any other costs associated with selling your product. They may include travel, client meals, sales meetings, equipment rental for presentations, copying, or miscellaneous printing costs.\n- Office salaries: These are the salaries of full- and part-time office personnel.\n- Rent: This is the fee incurred to rent or lease office or industrial space.\n- Utilities: These include costs for heating, air conditioning, electricity, Internet, and phone usage incurred in connection with your business.\n- Depreciation: Depreciation is an annual expense that takes into account the loss in value of equipment used in your business. Some examples of equipment that may be subject to depreciation include computers, office furniture, automobiles, and buildings that you own. If you don’t understand depreciation, don’t worry; I will explain it more carefully in a separate section.\n- Other overhead costs: Expense items that do not fall into any of the above categories or cannot be clearly associated with a particular product or function are considered to be other overhead costs. These types of expenses may include insurance, office supplies, or cleaning services.\n\nTo complete the formula and get your operating profit\/loss, you subtract your total operating expenses from your gross profit. Here’s the formula:\n\n(Revenue – COGS) – Operating Expenses = Operating Profit\/Loss\n\n### Step 3: Factor in Additional Revenue to Determine Your EBITDA\nEBITDA stands for “earnings before interest, taxes, depreciation, and amortization.” This is another measure of profitability. Depreciation refers to any reduction in the value of your business’s assets, such as equipment or machinery. Amortization refers to an accounting technique that may be used to decrease the book value of an intangible asset or loan over a defined period.\n\nA rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. However, precisely calculating and factoring in depreciation and amortization requires advanced accounting experience, so at this point, it’s best to turn to a professional.\n\n### Step 4: Subtract EBITDA from interest, taxes, depreciation, and amortization\nFinally, to calculate your operating profit\/loss, you must subtract the EBITDA from interest, taxes, depreciation, and amortization. Here’s the formula:\n\nNet Profit\/Loss = EBITDA – (Interest + Taxes + Depreciation)\n\nAgain, at this point, you’re likely best off leaving the job in the hands of an accountant or bookkeeper. Miscalculating some of these points, like depreciation, can have implications for income taxes. The [Internal Revenue Service](https:\/\/www.irs.gov\/publications\/p946) (IRS) has guidelines governing depreciation of business vehicles, for example, which a skilled tax professional will be well-acquainted with.\n\n## Sample Business Profit and Loss Statement Template\nGoing through an example profit and loss financial report can help clarify the process. Here, we take you through a scenario. Say you work as a freelance graphic designer. You’ve just finished your first quarter of business and want to create a profit and loss report. You follow the steps above.\n\nFirst, you need to establish your revenue. You sold \\$18,750 worth of graphic design services in your first three months as a freelancer. You also sold an old computer that you no longer used for work, bringing in another \\$250. In total, your revenue for the quarter was \\$19,000.\n\nHere’s how your P\\&L balance sheet looks so far:\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\n### Operating Profit\/Loss\nNext, you want to calculate your operating profit\/loss. You calculate your COGS (design software, printing production costs, paper costs, etc.) and see they added up to \\$2,000. You subtract that from your revenue to get a total of \\$17,000. That’s your gross profit. Next, you calculate your operating expenses. So far, your P\\&L statement looks like this:\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\nCost of Goods Sold: \\$2,000\n\n**Gross Profit:** **\\$17,000**\n\n### Operating Expenses\nNext comes operating expenses. You paid \\$3,000 for rent on your office space and \\$300 for utilities. You don’t have any employees yet, so you don’t have payroll expenses. Since your business is new, you don’t have depreciation and amortization costs to account for yet. Here’s what you’ve got now:\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\nCost of Goods Sold: \\$2,000\n\n**Gross Profit:** **\\$17,000**\n\n**Operating Expenses**\n\nPayroll: \\$0\n\nRent: \\$3,000\n\nUtilities: \\$300\n\nDepreciation and Amortization: \\$0\n\nTotal Operating Expenses: \\$3,300\n\n### Calculating EBITDA\nNow, a rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. So, that’s \\$19,000 (total sales = total revenue) minus \\$2,000 minus \\$3,300, equaling \\$13,700.\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\nCost of Goods Sold: \\$2,000\n\n**Gross Profit:** **\\$17,000**\n\n**Operating Expenses**\n\nPayroll: \\$0\n\nRent: \\$3,000\n\nUtilities: \\$300\n\nDepreciation and Amortization: \\$0\n\nTotal Operating Expenses: \\$3,300\n\n**EBIT\/Operating Profit** **\\$13,700**\n\n### Interest, Taxes, and Depreciation\nA bookkeeping professional can then factor in interest, taxes, and depreciation to complete your profit and loss statement using the formula: Net Profit\/Loss = EBITDA – (Interest + Taxes + Depreciation). The final statement with all line items accounted for might look something like this:\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\nCost of Goods Sold: \\$2,000\n\n**Gross Profit:** **\\$17,000**\n\n**Operating Expenses**\n\nPayroll: \\$0\n\nRent: \\$3,000\n\nUtilities: \\$300\n\nDepreciation and Amortization: \\$0\n\nTotal Operating Expenses: \\$3,300\n\n**EBIT \/ Operating Profit:**  **\\$13,700**\n\nInterest Expense: \\$700\n\nEBT \/ Earnings Before Taxes: \\$13,000\n\nTaxes (assuming a 15% tax rate): \\$1,950\n\n**Net Income:** **\\$11,050**\n\n## What You Can Learn from a Profit and Loss Statement\nSo, what’s the point of all those numbers? Your P\\&L financial statement contains a lot of valuable data. Here are three things you can learn from a P\\&L statement:\n\n- The financial health of a business\n- Business trends over time\n- Operational changes or improvements needed\n### Financial Health of a Business\nSimply put, the P\\&L lets everyone know what the “bottom line” is. A positive profit statement means you are making money. However, if your gross profit is low or negative, it’s time to reassess your business model. Do you need to increase sales? Cut back on operating costs? Identifying the problems allows you to fix them.\n\nYour business’s financial health may also be of interest to external parties. For example, if you approach lenders to take out a loan for your business or take out a business credit card, such documentation can secure a favorable loan or interest rate. Demonstrating strong profit margins is also critical if you ever hope to sell your business.\n\n### Business Trends Over Time\nTo truly excel, business owners need to look for trends in their business over time. A P\\&L statement helps identify important fluctuations that can inform smart business decisions. Say you run a holiday catering business, for example. Comparing your quarterly P\\&L statements, you see that Q4 is your strongest-performing quarter. That makes sense since Christmas, Thanksgiving, and New Year’s all fall in this period.\n\nHowever, you’re surprised to see that Q2 also performs strongly. Reviewing your records, you realize you cater to a lot of graduation parties in May and June. With this knowledge, you expand your Q2 marketing to capture more of this business.\n\n### Operational Changes or Improvements Needed\nA significant portion of the P\\&L statement is dedicated to operational details. This can help you identify areas you’re spending too much on, such as rent or payroll. Alternatively, you may find that you can afford to invest more in operating expenses (in the interests of expansion). For example, if you started your small business from home but want to expand with your own office space, you can use your P\\&L statement to determine if this is feasible.\n\n### What to Do Once You Have Your First Profit and Loss Statement\nNow, you know the basics of how to create a profit and loss statement. With the information you gain from your P\\&L statements, you can make important immediate business decisions, like whether you can afford to move to a larger office space or hire new employees. You can also make more “big picture” decisions, from planning your taxes to revamping your growth strategy.\n\nZenBusiness can support your business operations with educational resources. Get more tips on [running a business](https:\/\/www.zenbusiness.com\/run-your-business\/).\n\n**Recommended articles:**\n\n- [Understanding Profit & Loss Statements](https:\/\/www.zenbusiness.com\/blog\/understanding-profit-loss-statements\/)\n- [How to Calculate Profit Margins](https:\/\/www.zenbusiness.com\/calculate-profit-margins\/)\n- [How to Write a Business Problem Statement](https:\/\/www.zenbusiness.com\/business-problem-statement\/)\n- [How to Create a Pro Forma Cash Flow For Your Business](https:\/\/www.zenbusiness.com\/pro-forma-cash-flow\/)\n- [How to Create a Pro Forma Income Statement](https:\/\/www.zenbusiness.com\/pro-forma-income-statement\/)\n\nBusiness Expense Resources\n\n- [How to Calculate Profit Margins](https:\/\/www.zenbusiness.com\/calculate-profit-margins\/)\n- [How to Create a Pro Forma Income Statement](https:\/\/www.zenbusiness.com\/pro-forma-income-statement\/)\n- [How To Calculate Payroll](https:\/\/www.zenbusiness.com\/blog\/how-to-calculate-payroll\/)\n- [Ways to Calculate the Value of a Small Business](https:\/\/www.zenbusiness.com\/blog\/business-valuation-calculator\/)\n- [What Expenses Can I Claim Working From Home](https:\/\/www.zenbusiness.com\/blog\/self-employed-what-expenses-can-i-claim-working-from-home\/)\n- [How to Automatically Track Tax Deductible Expenses](https:\/\/www.zenbusiness.com\/blog\/how-to-automatically-track-tax-deductible-expenses\/)\n\n- [Reduce Recurring Business Expenses](https:\/\/www.zenbusiness.com\/blog\/why-small-businesses-fail\/)\n- [Tax-Deductible Startup Expenses](https:\/\/www.zenbusiness.com\/blog\/startup-tax-deductible-expenses\/)\n- [Employee Expense Reports](https:\/\/www.zenbusiness.com\/blog\/expense-reports\/)\n- [Personal vs Business Expenses](https:\/\/www.zenbusiness.com\/personal-vs-business-expenses\/)\n- [Best Practices for Business Expense Reports](https:\/\/www.zenbusiness.com\/expense-report-best-practices\/)\n- [Business Expense vs. Capital Expenditure](https:\/\/www.zenbusiness.com\/business-expense-vs-capital-expenditure\/)\n- [Expense Definition](https:\/\/www.zenbusiness.com\/expense-definition\/)\n\nShow All\n\n*Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. 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All rights reserved.\n\n[![Visit our instagram page](https:\/\/res.cloudinary.com\/zenbusiness\/q_auto,w_24,h_22\/v1\/shared-assets\/icon\/micro\/footer-icon-instagram-newbrand.svg)](https:\/\/www.instagram.com\/zenbusiness\/)   [![Visit our x page](https:\/\/res.cloudinary.com\/zenbusiness\/q_auto,w_24,h_24\/v1\/shared-assets\/s2\/icon\/social-x.svg)](https:\/\/x.com\/ZenBusinessInc)   [![Visit our facebook page](https:\/\/res.cloudinary.com\/zenbusiness\/q_auto,w_12,h_22\/v1\/shared-assets\/icon\/micro\/footer-icon-facebook-newbrand.svg)](https:\/\/www.facebook.com\/ZenBusinessInc\/)   [![Visit our linkedin page](https:\/\/res.cloudinary.com\/zenbusiness\/q_auto,w_20,h_20\/v1\/shared-assets\/icon\/micro\/footer-icon-linkedin-newbrand.svg)](https:\/\/www.linkedin.com\/company\/zenbusiness-pbc)\n\n![Public Benefit Corp](https:\/\/res.cloudinary.com\/zenbusiness\/q_auto\/v1\/shared-assets\/icon\/misc\/pbc-outline-128.svg)\n\n![](https:\/\/d21y75miwcfqoq.cloudfront.net\/ce7add6e)","attrs_readable_markdown":"Learn the four steps how to create your profit and loss statement in this guide below.\n\n![Create Your Profit and Loss Statement](https:\/\/res.cloudinary.com\/zenbusiness\/q_auto,w_525\/v1\/shared-assets\/stk\/profit-and-loss-statement.jpg)\n\nLast Updated: July 23, 2025\n\nWhether you’re working as a freelance consultant or managing your own plumbing company, you should know how to create a profit and loss (P\\&L) statement. Many small business owners and freelancers are hesitant to invest their energy into learning about such topics. After all, you became your own boss so that you can do work you’re passionate about, right? Business finance likely isn’t your main passion in life. However, a basic knowledge of accounting can make or break your business. Read more about why a Profit and Loss Statement is good for the [self employed](https:\/\/www.zenbusiness.com\/profit-loss-statement-self-employed\/)\n\n## What is a Profit and Loss (P\\&L) Statement?\nAn P\\&L statement is one of the most important business financial statements. You can use this statement to track revenues and expenses so that you can determine the operating performance of your business over a period of time. Small business owners use these statements to find out which areas of their business are over or under budget.\n\n### Pinpointing Essential Items\nThese statements allow you to pinpoint specific items that are causing unexpected expenditures, such as cell phone use, advertising, or supply expenses. P\\&L statements can also track dramatic increases in product returns or cost of goods sold as a percentage of sales, and can be used to determine income tax liability.\n\n### Lenders and Investors Require Them\nP\\&L statements, along with balance sheets, are the most basic elements required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contained therein to determine credit limits. Your P\\&L statement could decide if you get a loan or not. Lenders and investors will also want to see future projected financial statements called pro forma income statements, pro forma balance sheets and pro forma cash flows.\n\n## 4 Steps for Creating a Profit and Loss Statement\nThe thought of financial paperwork might make you cringe, especially if you’re not a big fan of math. Don’t stress because creating a P\\&L statement is pretty easy. There are a few quick steps you need to follow. There is even accounting software like QuickBooks to help.\n\nHere are the four main steps:\n\n- Establish your revenue figures.\n- Calculate your operating profit\/loss.\n- Factor in additional revenue to determine your EBITDA.\n- Subtract EBITDA from interest, taxes, depreciation, and amortization.\n### Step 1: Establish Your Revenue Figures\nRevenue encompasses any income your business generates. It includes the total sales that your business makes, whether of products or services. It also includes money that your business received from other avenues, such as selling equipment or through a tax refund. Create a list of these income streams and amounts and tally them up.\n\n#### What if You Have no Revenue Yet?\nIf you have just started your business, you may not have revenue yet. In this case, create an estimate. How much money do you expect to make in your first accounting period? You may already have some orders lined up. Forecasting your expected profits and losses will provide a benchmark to measure future business successes and failures.\n\n#### Establishing Revenue Figures\nEstablish your revenue figures in the given time frame for which you’re calculating a P\\&L statement. So, if you’re calculating a P\\&L statement for Q1, you have to input all your revenue from January, February, and March.\n\n### Step 2: Calculate Your Operating Profit\/Loss\nWith your revenue defined, you can calculate your operating profit\/loss. There is a precise formula to do this:\n\n(Revenue – Cost of Goods Sold) – Operating Expenses = Operating Profit\/Loss\n\nDoes that look like gibberish to you? Read on as we define each of those terms and break down the formula for you.\n\n#### Revenue\nWe covered it in the section above, but here’s a quick reminder: Your revenue refers to all the income your business has generated in a specified time frame. This includes the sale of goods and services and other income streams, like selling old business equipment.\n\n#### Cost of Goods Sold (COGS)\nThe cost of goods sold (COGS) refers to materials costs related to the production or sale of your business product or service. It could cover materials costs, for example, or manpower costs related to manufacturing.\n\nFor instance, if you run a coffee shop and sell a to-go coffee for \\$3.50, you aren’t making a full \\$3.50 off that sale. You have to subtract costs like the cost of coffee beans and the to-go cup. Another example: If you sell a product that you don’t manufacture yourself, you have to factor in the supplier costs.\n\nSometimes referred to as “direct costs,” COGS *only* cover expenses related to the sale or production of your given product or service. They don’t cover indirect costs, like accounting, rent, and marketing. Find out more about the difference between direct and indirect costs.\n\n#### Gross Profit\nTo get your gross profit, subtract your COGS (direct costs) from your revenue:\n\n(Revenue – COGS) = Gross Profit\n\n#### Operating Expenses\nFinally, you have to calculate your operating expenses. These are funds required to keep your business running on a day-to-day basis. Operating expenses include:\n\n- Sales salaries: These are the salaries plus bonuses and commissions paid to your sales staff.\n- Collateral and promotions: Collateral fees are expenses incurred in the creation or purchase of printed sales materials used by your sales staff in marketing and selling your product. Promotion fees include any product samples and giveaways used to promote or sell your product.\n- Advertising: These represent all costs involved in creating and placing print or multimedia advertising.\n- Other sales costs: These include any other costs associated with selling your product. They may include travel, client meals, sales meetings, equipment rental for presentations, copying, or miscellaneous printing costs.\n- Office salaries: These are the salaries of full- and part-time office personnel.\n- Rent: This is the fee incurred to rent or lease office or industrial space.\n- Utilities: These include costs for heating, air conditioning, electricity, Internet, and phone usage incurred in connection with your business.\n- Depreciation: Depreciation is an annual expense that takes into account the loss in value of equipment used in your business. Some examples of equipment that may be subject to depreciation include computers, office furniture, automobiles, and buildings that you own. If you don’t understand depreciation, don’t worry; I will explain it more carefully in a separate section.\n- Other overhead costs: Expense items that do not fall into any of the above categories or cannot be clearly associated with a particular product or function are considered to be other overhead costs. These types of expenses may include insurance, office supplies, or cleaning services.\n\nTo complete the formula and get your operating profit\/loss, you subtract your total operating expenses from your gross profit. Here’s the formula:\n\n(Revenue – COGS) – Operating Expenses = Operating Profit\/Loss\n\n### Step 3: Factor in Additional Revenue to Determine Your EBITDA\nEBITDA stands for “earnings before interest, taxes, depreciation, and amortization.” This is another measure of profitability. Depreciation refers to any reduction in the value of your business’s assets, such as equipment or machinery. Amortization refers to an accounting technique that may be used to decrease the book value of an intangible asset or loan over a defined period.\n\nA rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. However, precisely calculating and factoring in depreciation and amortization requires advanced accounting experience, so at this point, it’s best to turn to a professional.\n\n### Step 4: Subtract EBITDA from interest, taxes, depreciation, and amortization\nFinally, to calculate your operating profit\/loss, you must subtract the EBITDA from interest, taxes, depreciation, and amortization. Here’s the formula:\n\nNet Profit\/Loss = EBITDA – (Interest + Taxes + Depreciation)\n\nAgain, at this point, you’re likely best off leaving the job in the hands of an accountant or bookkeeper. Miscalculating some of these points, like depreciation, can have implications for income taxes. The [Internal Revenue Service](https:\/\/www.irs.gov\/publications\/p946) (IRS) has guidelines governing depreciation of business vehicles, for example, which a skilled tax professional will be well-acquainted with.\n\n## Sample Business Profit and Loss Statement Template\nGoing through an example profit and loss financial report can help clarify the process. Here, we take you through a scenario. Say you work as a freelance graphic designer. You’ve just finished your first quarter of business and want to create a profit and loss report. You follow the steps above.\n\nFirst, you need to establish your revenue. You sold \\$18,750 worth of graphic design services in your first three months as a freelancer. You also sold an old computer that you no longer used for work, bringing in another \\$250. In total, your revenue for the quarter was \\$19,000.\n\nHere’s how your P\\&L balance sheet looks so far:\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\n### Operating Profit\/Loss\nNext, you want to calculate your operating profit\/loss. You calculate your COGS (design software, printing production costs, paper costs, etc.) and see they added up to \\$2,000. You subtract that from your revenue to get a total of \\$17,000. That’s your gross profit. Next, you calculate your operating expenses. So far, your P\\&L statement looks like this:\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\nCost of Goods Sold: \\$2,000\n\n**Gross Profit:** **\\$17,000**\n\n### Operating Expenses\nNext comes operating expenses. You paid \\$3,000 for rent on your office space and \\$300 for utilities. You don’t have any employees yet, so you don’t have payroll expenses. Since your business is new, you don’t have depreciation and amortization costs to account for yet. Here’s what you’ve got now:\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\nCost of Goods Sold: \\$2,000\n\n**Gross Profit:** **\\$17,000**\n\n**Operating Expenses**\n\nPayroll: \\$0\n\nRent: \\$3,000\n\nUtilities: \\$300\n\nDepreciation and Amortization: \\$0\n\nTotal Operating Expenses: \\$3,300\n\n### Calculating EBITDA\nNow, a rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. So, that’s \\$19,000 (total sales = total revenue) minus \\$2,000 minus \\$3,300, equaling \\$13,700.\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\nCost of Goods Sold: \\$2,000\n\n**Gross Profit:** **\\$17,000**\n\n**Operating Expenses**\n\nPayroll: \\$0\n\nRent: \\$3,000\n\nUtilities: \\$300\n\nDepreciation and Amortization: \\$0\n\nTotal Operating Expenses: \\$3,300\n\n**EBIT\/Operating Profit** **\\$13,700**\n\n### Interest, Taxes, and Depreciation\nA bookkeeping professional can then factor in interest, taxes, and depreciation to complete your profit and loss statement using the formula: Net Profit\/Loss = EBITDA – (Interest + Taxes + Depreciation). The final statement with all line items accounted for might look something like this:\n\nSales, Services: \\$18,750\n\nSales, Other: \\$250\n\n**Total Sales** **\\$19,000**\n\nCost of Goods Sold: \\$2,000\n\n**Gross Profit:** **\\$17,000**\n\n**Operating Expenses**\n\nPayroll: \\$0\n\nRent: \\$3,000\n\nUtilities: \\$300\n\nDepreciation and Amortization: \\$0\n\nTotal Operating Expenses: \\$3,300\n\n**EBIT \/ Operating Profit:**  **\\$13,700**\n\nInterest Expense: \\$700\n\nEBT \/ Earnings Before Taxes: \\$13,000\n\nTaxes (assuming a 15% tax rate): \\$1,950\n\n**Net Income:** **\\$11,050**\n\n## What You Can Learn from a Profit and Loss Statement\nSo, what’s the point of all those numbers? Your P\\&L financial statement contains a lot of valuable data. Here are three things you can learn from a P\\&L statement:\n\n- The financial health of a business\n- Business trends over time\n- Operational changes or improvements needed\n### Financial Health of a Business\nSimply put, the P\\&L lets everyone know what the “bottom line” is. A positive profit statement means you are making money. However, if your gross profit is low or negative, it’s time to reassess your business model. Do you need to increase sales? Cut back on operating costs? Identifying the problems allows you to fix them.\n\nYour business’s financial health may also be of interest to external parties. For example, if you approach lenders to take out a loan for your business or take out a business credit card, such documentation can secure a favorable loan or interest rate. Demonstrating strong profit margins is also critical if you ever hope to sell your business.\n\n### Business Trends Over Time\nTo truly excel, business owners need to look for trends in their business over time. A P\\&L statement helps identify important fluctuations that can inform smart business decisions. Say you run a holiday catering business, for example. Comparing your quarterly P\\&L statements, you see that Q4 is your strongest-performing quarter. That makes sense since Christmas, Thanksgiving, and New Year’s all fall in this period.\n\nHowever, you’re surprised to see that Q2 also performs strongly. Reviewing your records, you realize you cater to a lot of graduation parties in May and June. With this knowledge, you expand your Q2 marketing to capture more of this business.\n\n### Operational Changes or Improvements Needed\nA significant portion of the P\\&L statement is dedicated to operational details. This can help you identify areas you’re spending too much on, such as rent or payroll. Alternatively, you may find that you can afford to invest more in operating expenses (in the interests of expansion). For example, if you started your small business from home but want to expand with your own office space, you can use your P\\&L statement to determine if this is feasible.\n\n### What to Do Once You Have Your First Profit and Loss Statement\nNow, you know the basics of how to create a profit and loss statement. With the information you gain from your P\\&L statements, you can make important immediate business decisions, like whether you can afford to move to a larger office space or hire new employees. You can also make more “big picture” decisions, from planning your taxes to revamping your growth strategy.\n\nZenBusiness can support your business operations with educational resources. Get more tips on [running a business](https:\/\/www.zenbusiness.com\/run-your-business\/).\n\n**Recommended articles:**\n\n- [Understanding Profit & Loss Statements](https:\/\/www.zenbusiness.com\/blog\/understanding-profit-loss-statements\/)\n- [How to Calculate Profit Margins](https:\/\/www.zenbusiness.com\/calculate-profit-margins\/)\n- [How to Write a Business Problem Statement](https:\/\/www.zenbusiness.com\/business-problem-statement\/)\n- [How to Create a Pro Forma Cash Flow For Your Business](https:\/\/www.zenbusiness.com\/pro-forma-cash-flow\/)\n- [How to Create a Pro Forma Income Statement](https:\/\/www.zenbusiness.com\/pro-forma-income-statement\/)\n\nBusiness Expense Resources\n\n- [How to Calculate Profit Margins](https:\/\/www.zenbusiness.com\/calculate-profit-margins\/)\n- [How to Create a Pro Forma Income Statement](https:\/\/www.zenbusiness.com\/pro-forma-income-statement\/)\n- [How To Calculate Payroll](https:\/\/www.zenbusiness.com\/blog\/how-to-calculate-payroll\/)\n- [Ways to Calculate the Value of a Small Business](https:\/\/www.zenbusiness.com\/blog\/business-valuation-calculator\/)\n- [What Expenses Can I Claim Working From Home](https:\/\/www.zenbusiness.com\/blog\/self-employed-what-expenses-can-i-claim-working-from-home\/)\n- [How to Automatically Track Tax Deductible Expenses](https:\/\/www.zenbusiness.com\/blog\/how-to-automatically-track-tax-deductible-expenses\/)\n\n- [Reduce Recurring Business Expenses](https:\/\/www.zenbusiness.com\/blog\/why-small-businesses-fail\/)\n- [Tax-Deductible Startup Expenses](https:\/\/www.zenbusiness.com\/blog\/startup-tax-deductible-expenses\/)\n- [Employee Expense Reports](https:\/\/www.zenbusiness.com\/blog\/expense-reports\/)\n- [Personal vs Business Expenses](https:\/\/www.zenbusiness.com\/personal-vs-business-expenses\/)\n- [Best Practices for Business Expense Reports](https:\/\/www.zenbusiness.com\/expense-report-best-practices\/)\n- [Business Expense vs. Capital Expenditure](https:\/\/www.zenbusiness.com\/business-expense-vs-capital-expenditure\/)\n- [Expense Definition](https:\/\/www.zenbusiness.com\/expense-definition\/)\n\n*Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional*.\n\n![zenbusiness logo](https:\/\/res.cloudinary.com\/zenbusiness\/q_auto,w_95\/v1\/shared-assets\/s2\/logo\/zb-mark-full-color.png)\n\nThe ZenBusiness Editorial Team has more than 20 years of combined small business publishing experience and has helped over **850,000** entrepreneurs launch and grow their companies. The team’s writers and business formation experts are dedicated to providing accurate, practical, and trustworthy guidance so business owners can make confident decisions.\n\nReady to Start Your LLC?","meta_canonical":null}

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Boilerpipe Text	Learn the four steps how to create your profit and loss statement in this guide below. Last Updated: July 23, 2025 Whether you’re working as a freelance consultant or managing your own plumbing company, you should know how to create a profit and loss (P&L) statement. Many small business owners and freelancers are hesitant to invest their energy into learning about such topics. After all, you became your own boss so that you can do work you’re passionate about, right? Business finance likely isn’t your main passion in life. However, a basic knowledge of accounting can make or break your business. Read more about why a Profit and Loss Statement is good for the self employed What is a Profit and Loss (P&L) Statement? An P&L statement is one of the most important business financial statements. You can use this statement to track revenues and expenses so that you can determine the operating performance of your business over a period of time. Small business owners use these statements to find out which areas of their business are over or under budget. Pinpointing Essential Items These statements allow you to pinpoint specific items that are causing unexpected expenditures, such as cell phone use, advertising, or supply expenses. P&L statements can also track dramatic increases in product returns or cost of goods sold as a percentage of sales, and can be used to determine income tax liability. Lenders and Investors Require Them P&L statements, along with balance sheets, are the most basic elements required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contained therein to determine credit limits. Your P&L statement could decide if you get a loan or not. Lenders and investors will also want to see future projected financial statements called pro forma income statements, pro forma balance sheets and pro forma cash flows. 4 Steps for Creating a Profit and Loss Statement The thought of financial paperwork might make you cringe, especially if you’re not a big fan of math. Don’t stress because creating a P&L statement is pretty easy. There are a few quick steps you need to follow. There is even accounting software like QuickBooks to help. Here are the four main steps: Establish your revenue figures. Calculate your operating profit/loss. Factor in additional revenue to determine your EBITDA. Subtract EBITDA from interest, taxes, depreciation, and amortization. Step 1: Establish Your Revenue Figures Revenue encompasses any income your business generates. It includes the total sales that your business makes, whether of products or services. It also includes money that your business received from other avenues, such as selling equipment or through a tax refund. Create a list of these income streams and amounts and tally them up. What if You Have no Revenue Yet? If you have just started your business, you may not have revenue yet. In this case, create an estimate. How much money do you expect to make in your first accounting period? You may already have some orders lined up. Forecasting your expected profits and losses will provide a benchmark to measure future business successes and failures. Establishing Revenue Figures Establish your revenue figures in the given time frame for which you’re calculating a P&L statement. So, if you’re calculating a P&L statement for Q1, you have to input all your revenue from January, February, and March. Step 2: Calculate Your Operating Profit/Loss With your revenue defined, you can calculate your operating profit/loss. There is a precise formula to do this: (Revenue – Cost of Goods Sold) – Operating Expenses = Operating Profit/Loss Does that look like gibberish to you? Read on as we define each of those terms and break down the formula for you. Revenue We covered it in the section above, but here’s a quick reminder: Your revenue refers to all the income your business has generated in a specified time frame. This includes the sale of goods and services and other income streams, like selling old business equipment. Cost of Goods Sold (COGS) The cost of goods sold (COGS) refers to materials costs related to the production or sale of your business product or service. It could cover materials costs, for example, or manpower costs related to manufacturing. For instance, if you run a coffee shop and sell a to-go coffee for $3.50, you aren’t making a full $3.50 off that sale. You have to subtract costs like the cost of coffee beans and the to-go cup. Another example: If you sell a product that you don’t manufacture yourself, you have to factor in the supplier costs. Sometimes referred to as “direct costs,” COGS only cover expenses related to the sale or production of your given product or service. They don’t cover indirect costs, like accounting, rent, and marketing. Find out more about the difference between direct and indirect costs. Gross Profit To get your gross profit, subtract your COGS (direct costs) from your revenue: (Revenue – COGS) = Gross Profit Operating Expenses Finally, you have to calculate your operating expenses. These are funds required to keep your business running on a day-to-day basis. Operating expenses include: Sales salaries: These are the salaries plus bonuses and commissions paid to your sales staff. Collateral and promotions: Collateral fees are expenses incurred in the creation or purchase of printed sales materials used by your sales staff in marketing and selling your product. Promotion fees include any product samples and giveaways used to promote or sell your product. Advertising: These represent all costs involved in creating and placing print or multimedia advertising. Other sales costs: These include any other costs associated with selling your product. They may include travel, client meals, sales meetings, equipment rental for presentations, copying, or miscellaneous printing costs. Office salaries: These are the salaries of full- and part-time office personnel. Rent: This is the fee incurred to rent or lease office or industrial space. Utilities: These include costs for heating, air conditioning, electricity, Internet, and phone usage incurred in connection with your business. Depreciation: Depreciation is an annual expense that takes into account the loss in value of equipment used in your business. Some examples of equipment that may be subject to depreciation include computers, office furniture, automobiles, and buildings that you own. If you don’t understand depreciation, don’t worry; I will explain it more carefully in a separate section. Other overhead costs: Expense items that do not fall into any of the above categories or cannot be clearly associated with a particular product or function are considered to be other overhead costs. These types of expenses may include insurance, office supplies, or cleaning services. To complete the formula and get your operating profit/loss, you subtract your total operating expenses from your gross profit. Here’s the formula: (Revenue – COGS) – Operating Expenses = Operating Profit/Loss Step 3: Factor in Additional Revenue to Determine Your EBITDA EBITDA stands for “earnings before interest, taxes, depreciation, and amortization.” This is another measure of profitability. Depreciation refers to any reduction in the value of your business’s assets, such as equipment or machinery. Amortization refers to an accounting technique that may be used to decrease the book value of an intangible asset or loan over a defined period. A rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. However, precisely calculating and factoring in depreciation and amortization requires advanced accounting experience, so at this point, it’s best to turn to a professional. Step 4: Subtract EBITDA from interest, taxes, depreciation, and amortization Finally, to calculate your operating profit/loss, you must subtract the EBITDA from interest, taxes, depreciation, and amortization. Here’s the formula: Net Profit/Loss = EBITDA – (Interest + Taxes + Depreciation) Again, at this point, you’re likely best off leaving the job in the hands of an accountant or bookkeeper. Miscalculating some of these points, like depreciation, can have implications for income taxes. The Internal Revenue Service (IRS) has guidelines governing depreciation of business vehicles, for example, which a skilled tax professional will be well-acquainted with. Sample Business Profit and Loss Statement Template Going through an example profit and loss financial report can help clarify the process. Here, we take you through a scenario. Say you work as a freelance graphic designer. You’ve just finished your first quarter of business and want to create a profit and loss report. You follow the steps above. First, you need to establish your revenue. You sold $18,750 worth of graphic design services in your first three months as a freelancer. You also sold an old computer that you no longer used for work, bringing in another $250. In total, your revenue for the quarter was $19,000. Here’s how your P&L balance sheet looks so far: Sales, Services: $18,750 Sales, Other: $250 Total Sales $19,000 Operating Profit/Loss Next, you want to calculate your operating profit/loss. You calculate your COGS (design software, printing production costs, paper costs, etc.) and see they added up to $2,000. You subtract that from your revenue to get a total of $17,000. That’s your gross profit. Next, you calculate your operating expenses. So far, your P&L statement looks like this: Sales, Services: $18,750 Sales, Other: $250 Total Sales $19,000 Cost of Goods Sold: $2,000 Gross Profit: $17,000 Operating Expenses Next comes operating expenses. You paid $3,000 for rent on your office space and $300 for utilities. You don’t have any employees yet, so you don’t have payroll expenses. Since your business is new, you don’t have depreciation and amortization costs to account for yet. Here’s what you’ve got now: Sales, Services: $18,750 Sales, Other: $250 Total Sales $19,000 Cost of Goods Sold: $2,000 Gross Profit: $17,000 Operating Expenses Payroll: $0 Rent: $3,000 Utilities: $300 Depreciation and Amortization: $0 Total Operating Expenses: $3,300 Calculating EBITDA Now, a rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. So, that’s $19,000 (total sales = total revenue) minus $2,000 minus $3,300, equaling $13,700. Sales, Services: $18,750 Sales, Other: $250 Total Sales $19,000 Cost of Goods Sold: $2,000 Gross Profit: $17,000 Operating Expenses Payroll: $0 Rent: $3,000 Utilities: $300 Depreciation and Amortization: $0 Total Operating Expenses: $3,300 EBIT/Operating Profit $13,700 Interest, Taxes, and Depreciation A bookkeeping professional can then factor in interest, taxes, and depreciation to complete your profit and loss statement using the formula: Net Profit/Loss = EBITDA – (Interest + Taxes + Depreciation). The final statement with all line items accounted for might look something like this: Sales, Services: $18,750 Sales, Other: $250 Total Sales $19,000 Cost of Goods Sold: $2,000 Gross Profit: $17,000 Operating Expenses Payroll: $0 Rent: $3,000 Utilities: $300 Depreciation and Amortization: $0 Total Operating Expenses: $3,300 EBIT / Operating Profit: $13,700 Interest Expense: $700 EBT / Earnings Before Taxes: $13,000 Taxes (assuming a 15% tax rate): $1,950 Net Income: $11,050 What You Can Learn from a Profit and Loss Statement So, what’s the point of all those numbers? Your P&L financial statement contains a lot of valuable data. Here are three things you can learn from a P&L statement: The financial health of a business Business trends over time Operational changes or improvements needed Financial Health of a Business Simply put, the P&L lets everyone know what the “bottom line” is. A positive profit statement means you are making money. However, if your gross profit is low or negative, it’s time to reassess your business model. Do you need to increase sales? Cut back on operating costs? Identifying the problems allows you to fix them. Your business’s financial health may also be of interest to external parties. For example, if you approach lenders to take out a loan for your business or take out a business credit card, such documentation can secure a favorable loan or interest rate. Demonstrating strong profit margins is also critical if you ever hope to sell your business. Business Trends Over Time To truly excel, business owners need to look for trends in their business over time. A P&L statement helps identify important fluctuations that can inform smart business decisions. Say you run a holiday catering business, for example. Comparing your quarterly P&L statements, you see that Q4 is your strongest-performing quarter. That makes sense since Christmas, Thanksgiving, and New Year’s all fall in this period. However, you’re surprised to see that Q2 also performs strongly. Reviewing your records, you realize you cater to a lot of graduation parties in May and June. With this knowledge, you expand your Q2 marketing to capture more of this business. Operational Changes or Improvements Needed A significant portion of the P&L statement is dedicated to operational details. This can help you identify areas you’re spending too much on, such as rent or payroll. Alternatively, you may find that you can afford to invest more in operating expenses (in the interests of expansion). For example, if you started your small business from home but want to expand with your own office space, you can use your P&L statement to determine if this is feasible. What to Do Once You Have Your First Profit and Loss Statement Now, you know the basics of how to create a profit and loss statement. With the information you gain from your P&L statements, you can make important immediate business decisions, like whether you can afford to move to a larger office space or hire new employees. You can also make more “big picture” decisions, from planning your taxes to revamping your growth strategy. ZenBusiness can support your business operations with educational resources. Get more tips on running a business . Recommended articles: Understanding Profit & Loss Statements How to Calculate Profit Margins How to Write a Business Problem Statement How to Create a Pro Forma Cash Flow For Your Business How to Create a Pro Forma Income Statement Business Expense Resources How to Calculate Profit Margins How to Create a Pro Forma Income Statement How To Calculate Payroll Ways to Calculate the Value of a Small Business What Expenses Can I Claim Working From Home How to Automatically Track Tax Deductible Expenses Reduce Recurring Business Expenses Tax-Deductible Startup Expenses Employee Expense Reports Personal vs Business Expenses Best Practices for Business Expense Reports Business Expense vs. Capital Expenditure Expense Definition Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional . The ZenBusiness Editorial Team has more than 20 years of combined small business publishing experience and has helped over 850,000 entrepreneurs launch and grow their companies. The team’s writers and business formation experts are dedicated to providing accurate, practical, and trustworthy guidance so business owners can make confident decisions. Ready to Start Your LLC?
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[What is a Profit and Loss (P\&L) Statement?](https://www.zenbusiness.com/profit-and-loss-statement/#h-what-is-a-profit-and-loss-p-l-statement) - [4 Steps for Creating a Profit and Loss Statement](https://www.zenbusiness.com/profit-and-loss-statement/#h-4-steps-for-creating-a-profit-and-loss-statement) - [Sample Business Profit and Loss Statement Template](https://www.zenbusiness.com/profit-and-loss-statement/#Sample-Business-Profit-and-Loss-Statement-Template) - [What You Can Learn from a Profit and Loss Statement](https://www.zenbusiness.com/profit-and-loss-statement/#h-What-You-Can-Learn-from-a-Profit-and-Loss-Statement) ![Create Your Profit and Loss Statement](https://res.cloudinary.com/zenbusiness/q_auto,w_525/v1/shared-assets/stk/profit-and-loss-statement.jpg) Excellent ![4\.8 out of 5 stars](https://res.cloudinary.com/zenbusiness/q_auto/v1/shared-assets/illustration/trustpilot-5-star.svg) [28,452 reviews](https://www.trustpilot.com/review/www.zenbusiness.com) ![Trustpilot logo](https://res.cloudinary.com/zenbusiness/q_auto/v1/shared-assets/logo/trustpilot-logo-white.svg) Last Updated: July 23, 2025 Whether you’re working as a freelance consultant or managing your own plumbing company, you should know how to create a profit and loss (P\&L) statement. Many small business owners and freelancers are hesitant to invest their energy into learning about such topics. After all, you became your own boss so that you can do work you’re passionate about, right? Business finance likely isn’t your main passion in life. However, a basic knowledge of accounting can make or break your business. Read more about why a Profit and Loss Statement is good for the [self employed](https://www.zenbusiness.com/profit-loss-statement-self-employed/) ## What is a Profit and Loss (P\&L) Statement? An P\&L statement is one of the most important business financial statements. You can use this statement to track revenues and expenses so that you can determine the operating performance of your business over a period of time. Small business owners use these statements to find out which areas of their business are over or under budget. ### Pinpointing Essential Items These statements allow you to pinpoint specific items that are causing unexpected expenditures, such as cell phone use, advertising, or supply expenses. P\&L statements can also track dramatic increases in product returns or cost of goods sold as a percentage of sales, and can be used to determine income tax liability. ### Lenders and Investors Require Them P\&L statements, along with balance sheets, are the most basic elements required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contained therein to determine credit limits. Your P\&L statement could decide if you get a loan or not. Lenders and investors will also want to see future projected financial statements called pro forma income statements, pro forma balance sheets and pro forma cash flows. ## 4 Steps for Creating a Profit and Loss Statement The thought of financial paperwork might make you cringe, especially if you’re not a big fan of math. Don’t stress because creating a P\&L statement is pretty easy. There are a few quick steps you need to follow. There is even accounting software like QuickBooks to help. Here are the four main steps: - Establish your revenue figures. - Calculate your operating profit/loss. - Factor in additional revenue to determine your EBITDA. - Subtract EBITDA from interest, taxes, depreciation, and amortization. ### Step 1: Establish Your Revenue Figures Revenue encompasses any income your business generates. It includes the total sales that your business makes, whether of products or services. It also includes money that your business received from other avenues, such as selling equipment or through a tax refund. Create a list of these income streams and amounts and tally them up. #### What if You Have no Revenue Yet? If you have just started your business, you may not have revenue yet. In this case, create an estimate. How much money do you expect to make in your first accounting period? You may already have some orders lined up. Forecasting your expected profits and losses will provide a benchmark to measure future business successes and failures. #### Establishing Revenue Figures Establish your revenue figures in the given time frame for which you’re calculating a P\&L statement. So, if you’re calculating a P\&L statement for Q1, you have to input all your revenue from January, February, and March. ### Step 2: Calculate Your Operating Profit/Loss With your revenue defined, you can calculate your operating profit/loss. There is a precise formula to do this: (Revenue – Cost of Goods Sold) – Operating Expenses = Operating Profit/Loss Does that look like gibberish to you? Read on as we define each of those terms and break down the formula for you. #### Revenue We covered it in the section above, but here’s a quick reminder: Your revenue refers to all the income your business has generated in a specified time frame. This includes the sale of goods and services and other income streams, like selling old business equipment. #### Cost of Goods Sold (COGS) The cost of goods sold (COGS) refers to materials costs related to the production or sale of your business product or service. It could cover materials costs, for example, or manpower costs related to manufacturing. For instance, if you run a coffee shop and sell a to-go coffee for \$3.50, you aren’t making a full \$3.50 off that sale. You have to subtract costs like the cost of coffee beans and the to-go cup. Another example: If you sell a product that you don’t manufacture yourself, you have to factor in the supplier costs. Sometimes referred to as “direct costs,” COGS only cover expenses related to the sale or production of your given product or service. They don’t cover indirect costs, like accounting, rent, and marketing. Find out more about the difference between direct and indirect costs. #### Gross Profit To get your gross profit, subtract your COGS (direct costs) from your revenue: (Revenue – COGS) = Gross Profit #### Operating Expenses Finally, you have to calculate your operating expenses. These are funds required to keep your business running on a day-to-day basis. Operating expenses include: - Sales salaries: These are the salaries plus bonuses and commissions paid to your sales staff. - Collateral and promotions: Collateral fees are expenses incurred in the creation or purchase of printed sales materials used by your sales staff in marketing and selling your product. Promotion fees include any product samples and giveaways used to promote or sell your product. - Advertising: These represent all costs involved in creating and placing print or multimedia advertising. - Other sales costs: These include any other costs associated with selling your product. They may include travel, client meals, sales meetings, equipment rental for presentations, copying, or miscellaneous printing costs. - Office salaries: These are the salaries of full- and part-time office personnel. - Rent: This is the fee incurred to rent or lease office or industrial space. - Utilities: These include costs for heating, air conditioning, electricity, Internet, and phone usage incurred in connection with your business. - Depreciation: Depreciation is an annual expense that takes into account the loss in value of equipment used in your business. Some examples of equipment that may be subject to depreciation include computers, office furniture, automobiles, and buildings that you own. If you don’t understand depreciation, don’t worry; I will explain it more carefully in a separate section. - Other overhead costs: Expense items that do not fall into any of the above categories or cannot be clearly associated with a particular product or function are considered to be other overhead costs. These types of expenses may include insurance, office supplies, or cleaning services. To complete the formula and get your operating profit/loss, you subtract your total operating expenses from your gross profit. Here’s the formula: (Revenue – COGS) – Operating Expenses = Operating Profit/Loss ### Step 3: Factor in Additional Revenue to Determine Your EBITDA EBITDA stands for “earnings before interest, taxes, depreciation, and amortization.” This is another measure of profitability. Depreciation refers to any reduction in the value of your business’s assets, such as equipment or machinery. Amortization refers to an accounting technique that may be used to decrease the book value of an intangible asset or loan over a defined period. A rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. However, precisely calculating and factoring in depreciation and amortization requires advanced accounting experience, so at this point, it’s best to turn to a professional. ### Step 4: Subtract EBITDA from interest, taxes, depreciation, and amortization Finally, to calculate your operating profit/loss, you must subtract the EBITDA from interest, taxes, depreciation, and amortization. Here’s the formula: Net Profit/Loss = EBITDA – (Interest + Taxes + Depreciation) Again, at this point, you’re likely best off leaving the job in the hands of an accountant or bookkeeper. Miscalculating some of these points, like depreciation, can have implications for income taxes. The [Internal Revenue Service](https://www.irs.gov/publications/p946) (IRS) has guidelines governing depreciation of business vehicles, for example, which a skilled tax professional will be well-acquainted with. ## Sample Business Profit and Loss Statement Template Going through an example profit and loss financial report can help clarify the process. Here, we take you through a scenario. Say you work as a freelance graphic designer. You’ve just finished your first quarter of business and want to create a profit and loss report. You follow the steps above. First, you need to establish your revenue. You sold \$18,750 worth of graphic design services in your first three months as a freelancer. You also sold an old computer that you no longer used for work, bringing in another \$250. In total, your revenue for the quarter was \$19,000. Here’s how your P\&L balance sheet looks so far: Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 ### Operating Profit/Loss Next, you want to calculate your operating profit/loss. You calculate your COGS (design software, printing production costs, paper costs, etc.) and see they added up to \$2,000. You subtract that from your revenue to get a total of \$17,000. That’s your gross profit. Next, you calculate your operating expenses. So far, your P\&L statement looks like this: Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 Cost of Goods Sold: \$2,000 Gross Profit: \$17,000 ### Operating Expenses Next comes operating expenses. You paid \$3,000 for rent on your office space and \$300 for utilities. You don’t have any employees yet, so you don’t have payroll expenses. Since your business is new, you don’t have depreciation and amortization costs to account for yet. Here’s what you’ve got now: Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 Cost of Goods Sold: \$2,000 Gross Profit: \$17,000 Operating Expenses Payroll: \$0 Rent: \$3,000 Utilities: \$300 Depreciation and Amortization: \$0 Total Operating Expenses: \$3,300 ### Calculating EBITDA Now, a rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. So, that’s \$19,000 (total sales = total revenue) minus \$2,000 minus \$3,300, equaling \$13,700. Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 Cost of Goods Sold: \$2,000 Gross Profit: \$17,000 Operating Expenses Payroll: \$0 Rent: \$3,000 Utilities: \$300 Depreciation and Amortization: \$0 Total Operating Expenses: \$3,300 EBIT/Operating Profit \$13,700 ### Interest, Taxes, and Depreciation A bookkeeping professional can then factor in interest, taxes, and depreciation to complete your profit and loss statement using the formula: Net Profit/Loss = EBITDA – (Interest + Taxes + Depreciation). The final statement with all line items accounted for might look something like this: Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 Cost of Goods Sold: \$2,000 Gross Profit: \$17,000 Operating Expenses Payroll: \$0 Rent: \$3,000 Utilities: \$300 Depreciation and Amortization: \$0 Total Operating Expenses: \$3,300 EBIT / Operating Profit: \$13,700 Interest Expense: \$700 EBT / Earnings Before Taxes: \$13,000 Taxes (assuming a 15% tax rate): \$1,950 Net Income: \$11,050 ## What You Can Learn from a Profit and Loss Statement So, what’s the point of all those numbers? Your P\&L financial statement contains a lot of valuable data. Here are three things you can learn from a P\&L statement: - The financial health of a business - Business trends over time - Operational changes or improvements needed ### Financial Health of a Business Simply put, the P\&L lets everyone know what the “bottom line” is. A positive profit statement means you are making money. However, if your gross profit is low or negative, it’s time to reassess your business model. Do you need to increase sales? Cut back on operating costs? Identifying the problems allows you to fix them. Your business’s financial health may also be of interest to external parties. For example, if you approach lenders to take out a loan for your business or take out a business credit card, such documentation can secure a favorable loan or interest rate. Demonstrating strong profit margins is also critical if you ever hope to sell your business. ### Business Trends Over Time To truly excel, business owners need to look for trends in their business over time. A P\&L statement helps identify important fluctuations that can inform smart business decisions. Say you run a holiday catering business, for example. Comparing your quarterly P\&L statements, you see that Q4 is your strongest-performing quarter. That makes sense since Christmas, Thanksgiving, and New Year’s all fall in this period. However, you’re surprised to see that Q2 also performs strongly. Reviewing your records, you realize you cater to a lot of graduation parties in May and June. With this knowledge, you expand your Q2 marketing to capture more of this business. ### Operational Changes or Improvements Needed A significant portion of the P\&L statement is dedicated to operational details. This can help you identify areas you’re spending too much on, such as rent or payroll. Alternatively, you may find that you can afford to invest more in operating expenses (in the interests of expansion). For example, if you started your small business from home but want to expand with your own office space, you can use your P\&L statement to determine if this is feasible. ### What to Do Once You Have Your First Profit and Loss Statement Now, you know the basics of how to create a profit and loss statement. With the information you gain from your P\&L statements, you can make important immediate business decisions, like whether you can afford to move to a larger office space or hire new employees. You can also make more “big picture” decisions, from planning your taxes to revamping your growth strategy. ZenBusiness can support your business operations with educational resources. Get more tips on [running a business](https://www.zenbusiness.com/run-your-business/). Recommended articles: - [Understanding Profit & Loss Statements](https://www.zenbusiness.com/blog/understanding-profit-loss-statements/) - [How to Calculate Profit Margins](https://www.zenbusiness.com/calculate-profit-margins/) - [How to Write a Business Problem Statement](https://www.zenbusiness.com/business-problem-statement/) - [How to Create a Pro Forma Cash Flow For Your Business](https://www.zenbusiness.com/pro-forma-cash-flow/) - [How to Create a Pro Forma Income Statement](https://www.zenbusiness.com/pro-forma-income-statement/) Business Expense Resources - [How to Calculate Profit Margins](https://www.zenbusiness.com/calculate-profit-margins/) - [How to Create a Pro Forma Income Statement](https://www.zenbusiness.com/pro-forma-income-statement/) - [How To Calculate Payroll](https://www.zenbusiness.com/blog/how-to-calculate-payroll/) - [Ways to Calculate the Value of a Small Business](https://www.zenbusiness.com/blog/business-valuation-calculator/) - [What Expenses Can I Claim Working From Home](https://www.zenbusiness.com/blog/self-employed-what-expenses-can-i-claim-working-from-home/) - [How to Automatically Track Tax Deductible Expenses](https://www.zenbusiness.com/blog/how-to-automatically-track-tax-deductible-expenses/) - [Reduce Recurring Business Expenses](https://www.zenbusiness.com/blog/why-small-businesses-fail/) - [Tax-Deductible Startup Expenses](https://www.zenbusiness.com/blog/startup-tax-deductible-expenses/) - [Employee Expense Reports](https://www.zenbusiness.com/blog/expense-reports/) - [Personal vs Business Expenses](https://www.zenbusiness.com/personal-vs-business-expenses/) - [Best Practices for Business Expense Reports](https://www.zenbusiness.com/expense-report-best-practices/) - [Business Expense vs. Capital Expenditure](https://www.zenbusiness.com/business-expense-vs-capital-expenditure/) - [Expense Definition](https://www.zenbusiness.com/expense-definition/) Show All Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. 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Readable Markdown	Learn the four steps how to create your profit and loss statement in this guide below. ![Create Your Profit and Loss Statement](https://res.cloudinary.com/zenbusiness/q_auto,w_525/v1/shared-assets/stk/profit-and-loss-statement.jpg) Last Updated: July 23, 2025 Whether you’re working as a freelance consultant or managing your own plumbing company, you should know how to create a profit and loss (P\&L) statement. Many small business owners and freelancers are hesitant to invest their energy into learning about such topics. After all, you became your own boss so that you can do work you’re passionate about, right? Business finance likely isn’t your main passion in life. However, a basic knowledge of accounting can make or break your business. Read more about why a Profit and Loss Statement is good for the [self employed](https://www.zenbusiness.com/profit-loss-statement-self-employed/) ## What is a Profit and Loss (P\&L) Statement? An P\&L statement is one of the most important business financial statements. You can use this statement to track revenues and expenses so that you can determine the operating performance of your business over a period of time. Small business owners use these statements to find out which areas of their business are over or under budget. ### Pinpointing Essential Items These statements allow you to pinpoint specific items that are causing unexpected expenditures, such as cell phone use, advertising, or supply expenses. P\&L statements can also track dramatic increases in product returns or cost of goods sold as a percentage of sales, and can be used to determine income tax liability. ### Lenders and Investors Require Them P\&L statements, along with balance sheets, are the most basic elements required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contained therein to determine credit limits. Your P\&L statement could decide if you get a loan or not. Lenders and investors will also want to see future projected financial statements called pro forma income statements, pro forma balance sheets and pro forma cash flows. ## 4 Steps for Creating a Profit and Loss Statement The thought of financial paperwork might make you cringe, especially if you’re not a big fan of math. Don’t stress because creating a P\&L statement is pretty easy. There are a few quick steps you need to follow. There is even accounting software like QuickBooks to help. Here are the four main steps: - Establish your revenue figures. - Calculate your operating profit/loss. - Factor in additional revenue to determine your EBITDA. - Subtract EBITDA from interest, taxes, depreciation, and amortization. ### Step 1: Establish Your Revenue Figures Revenue encompasses any income your business generates. It includes the total sales that your business makes, whether of products or services. It also includes money that your business received from other avenues, such as selling equipment or through a tax refund. Create a list of these income streams and amounts and tally them up. #### What if You Have no Revenue Yet? If you have just started your business, you may not have revenue yet. In this case, create an estimate. How much money do you expect to make in your first accounting period? You may already have some orders lined up. Forecasting your expected profits and losses will provide a benchmark to measure future business successes and failures. #### Establishing Revenue Figures Establish your revenue figures in the given time frame for which you’re calculating a P\&L statement. So, if you’re calculating a P\&L statement for Q1, you have to input all your revenue from January, February, and March. ### Step 2: Calculate Your Operating Profit/Loss With your revenue defined, you can calculate your operating profit/loss. There is a precise formula to do this: (Revenue – Cost of Goods Sold) – Operating Expenses = Operating Profit/Loss Does that look like gibberish to you? Read on as we define each of those terms and break down the formula for you. #### Revenue We covered it in the section above, but here’s a quick reminder: Your revenue refers to all the income your business has generated in a specified time frame. This includes the sale of goods and services and other income streams, like selling old business equipment. #### Cost of Goods Sold (COGS) The cost of goods sold (COGS) refers to materials costs related to the production or sale of your business product or service. It could cover materials costs, for example, or manpower costs related to manufacturing. For instance, if you run a coffee shop and sell a to-go coffee for \$3.50, you aren’t making a full \$3.50 off that sale. You have to subtract costs like the cost of coffee beans and the to-go cup. Another example: If you sell a product that you don’t manufacture yourself, you have to factor in the supplier costs. Sometimes referred to as “direct costs,” COGS only cover expenses related to the sale or production of your given product or service. They don’t cover indirect costs, like accounting, rent, and marketing. Find out more about the difference between direct and indirect costs. #### Gross Profit To get your gross profit, subtract your COGS (direct costs) from your revenue: (Revenue – COGS) = Gross Profit #### Operating Expenses Finally, you have to calculate your operating expenses. These are funds required to keep your business running on a day-to-day basis. Operating expenses include: - Sales salaries: These are the salaries plus bonuses and commissions paid to your sales staff. - Collateral and promotions: Collateral fees are expenses incurred in the creation or purchase of printed sales materials used by your sales staff in marketing and selling your product. Promotion fees include any product samples and giveaways used to promote or sell your product. - Advertising: These represent all costs involved in creating and placing print or multimedia advertising. - Other sales costs: These include any other costs associated with selling your product. They may include travel, client meals, sales meetings, equipment rental for presentations, copying, or miscellaneous printing costs. - Office salaries: These are the salaries of full- and part-time office personnel. - Rent: This is the fee incurred to rent or lease office or industrial space. - Utilities: These include costs for heating, air conditioning, electricity, Internet, and phone usage incurred in connection with your business. - Depreciation: Depreciation is an annual expense that takes into account the loss in value of equipment used in your business. Some examples of equipment that may be subject to depreciation include computers, office furniture, automobiles, and buildings that you own. If you don’t understand depreciation, don’t worry; I will explain it more carefully in a separate section. - Other overhead costs: Expense items that do not fall into any of the above categories or cannot be clearly associated with a particular product or function are considered to be other overhead costs. These types of expenses may include insurance, office supplies, or cleaning services. To complete the formula and get your operating profit/loss, you subtract your total operating expenses from your gross profit. Here’s the formula: (Revenue – COGS) – Operating Expenses = Operating Profit/Loss ### Step 3: Factor in Additional Revenue to Determine Your EBITDA EBITDA stands for “earnings before interest, taxes, depreciation, and amortization.” This is another measure of profitability. Depreciation refers to any reduction in the value of your business’s assets, such as equipment or machinery. Amortization refers to an accounting technique that may be used to decrease the book value of an intangible asset or loan over a defined period. A rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. However, precisely calculating and factoring in depreciation and amortization requires advanced accounting experience, so at this point, it’s best to turn to a professional. ### Step 4: Subtract EBITDA from interest, taxes, depreciation, and amortization Finally, to calculate your operating profit/loss, you must subtract the EBITDA from interest, taxes, depreciation, and amortization. Here’s the formula: Net Profit/Loss = EBITDA – (Interest + Taxes + Depreciation) Again, at this point, you’re likely best off leaving the job in the hands of an accountant or bookkeeper. Miscalculating some of these points, like depreciation, can have implications for income taxes. The [Internal Revenue Service](https://www.irs.gov/publications/p946) (IRS) has guidelines governing depreciation of business vehicles, for example, which a skilled tax professional will be well-acquainted with. ## Sample Business Profit and Loss Statement Template Going through an example profit and loss financial report can help clarify the process. Here, we take you through a scenario. Say you work as a freelance graphic designer. You’ve just finished your first quarter of business and want to create a profit and loss report. You follow the steps above. First, you need to establish your revenue. You sold \$18,750 worth of graphic design services in your first three months as a freelancer. You also sold an old computer that you no longer used for work, bringing in another \$250. In total, your revenue for the quarter was \$19,000. Here’s how your P\&L balance sheet looks so far: Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 ### Operating Profit/Loss Next, you want to calculate your operating profit/loss. You calculate your COGS (design software, printing production costs, paper costs, etc.) and see they added up to \$2,000. You subtract that from your revenue to get a total of \$17,000. That’s your gross profit. Next, you calculate your operating expenses. So far, your P\&L statement looks like this: Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 Cost of Goods Sold: \$2,000 Gross Profit: \$17,000 ### Operating Expenses Next comes operating expenses. You paid \$3,000 for rent on your office space and \$300 for utilities. You don’t have any employees yet, so you don’t have payroll expenses. Since your business is new, you don’t have depreciation and amortization costs to account for yet. Here’s what you’ve got now: Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 Cost of Goods Sold: \$2,000 Gross Profit: \$17,000 Operating Expenses Payroll: \$0 Rent: \$3,000 Utilities: \$300 Depreciation and Amortization: \$0 Total Operating Expenses: \$3,300 ### Calculating EBITDA Now, a rough calculation of EBITDA would involve subtracting your operating expenses, cost of goods, and depreciation from your total revenue. So, that’s \$19,000 (total sales = total revenue) minus \$2,000 minus \$3,300, equaling \$13,700. Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 Cost of Goods Sold: \$2,000 Gross Profit: \$17,000 Operating Expenses Payroll: \$0 Rent: \$3,000 Utilities: \$300 Depreciation and Amortization: \$0 Total Operating Expenses: \$3,300 EBIT/Operating Profit \$13,700 ### Interest, Taxes, and Depreciation A bookkeeping professional can then factor in interest, taxes, and depreciation to complete your profit and loss statement using the formula: Net Profit/Loss = EBITDA – (Interest + Taxes + Depreciation). The final statement with all line items accounted for might look something like this: Sales, Services: \$18,750 Sales, Other: \$250 Total Sales \$19,000 Cost of Goods Sold: \$2,000 Gross Profit: \$17,000 Operating Expenses Payroll: \$0 Rent: \$3,000 Utilities: \$300 Depreciation and Amortization: \$0 Total Operating Expenses: \$3,300 EBIT / Operating Profit: \$13,700 Interest Expense: \$700 EBT / Earnings Before Taxes: \$13,000 Taxes (assuming a 15% tax rate): \$1,950 Net Income: \$11,050 ## What You Can Learn from a Profit and Loss Statement So, what’s the point of all those numbers? Your P\&L financial statement contains a lot of valuable data. Here are three things you can learn from a P\&L statement: - The financial health of a business - Business trends over time - Operational changes or improvements needed ### Financial Health of a Business Simply put, the P\&L lets everyone know what the “bottom line” is. A positive profit statement means you are making money. However, if your gross profit is low or negative, it’s time to reassess your business model. Do you need to increase sales? Cut back on operating costs? Identifying the problems allows you to fix them. Your business’s financial health may also be of interest to external parties. For example, if you approach lenders to take out a loan for your business or take out a business credit card, such documentation can secure a favorable loan or interest rate. Demonstrating strong profit margins is also critical if you ever hope to sell your business. ### Business Trends Over Time To truly excel, business owners need to look for trends in their business over time. A P\&L statement helps identify important fluctuations that can inform smart business decisions. Say you run a holiday catering business, for example. Comparing your quarterly P\&L statements, you see that Q4 is your strongest-performing quarter. That makes sense since Christmas, Thanksgiving, and New Year’s all fall in this period. However, you’re surprised to see that Q2 also performs strongly. Reviewing your records, you realize you cater to a lot of graduation parties in May and June. With this knowledge, you expand your Q2 marketing to capture more of this business. ### Operational Changes or Improvements Needed A significant portion of the P\&L statement is dedicated to operational details. This can help you identify areas you’re spending too much on, such as rent or payroll. Alternatively, you may find that you can afford to invest more in operating expenses (in the interests of expansion). For example, if you started your small business from home but want to expand with your own office space, you can use your P\&L statement to determine if this is feasible. ### What to Do Once You Have Your First Profit and Loss Statement Now, you know the basics of how to create a profit and loss statement. With the information you gain from your P\&L statements, you can make important immediate business decisions, like whether you can afford to move to a larger office space or hire new employees. You can also make more “big picture” decisions, from planning your taxes to revamping your growth strategy. ZenBusiness can support your business operations with educational resources. Get more tips on [running a business](https://www.zenbusiness.com/run-your-business/). Recommended articles: - [Understanding Profit & Loss Statements](https://www.zenbusiness.com/blog/understanding-profit-loss-statements/) - [How to Calculate Profit Margins](https://www.zenbusiness.com/calculate-profit-margins/) - [How to Write a Business Problem Statement](https://www.zenbusiness.com/business-problem-statement/) - [How to Create a Pro Forma Cash Flow For Your Business](https://www.zenbusiness.com/pro-forma-cash-flow/) - [How to Create a Pro Forma Income Statement](https://www.zenbusiness.com/pro-forma-income-statement/) Business Expense Resources - [How to Calculate Profit Margins](https://www.zenbusiness.com/calculate-profit-margins/) - [How to Create a Pro Forma Income Statement](https://www.zenbusiness.com/pro-forma-income-statement/) - [How To Calculate Payroll](https://www.zenbusiness.com/blog/how-to-calculate-payroll/) - [Ways to Calculate the Value of a Small Business](https://www.zenbusiness.com/blog/business-valuation-calculator/) - [What Expenses Can I Claim Working From Home](https://www.zenbusiness.com/blog/self-employed-what-expenses-can-i-claim-working-from-home/) - [How to Automatically Track Tax Deductible Expenses](https://www.zenbusiness.com/blog/how-to-automatically-track-tax-deductible-expenses/) - [Reduce Recurring Business Expenses](https://www.zenbusiness.com/blog/why-small-businesses-fail/) - [Tax-Deductible Startup Expenses](https://www.zenbusiness.com/blog/startup-tax-deductible-expenses/) - [Employee Expense Reports](https://www.zenbusiness.com/blog/expense-reports/) - [Personal vs Business Expenses](https://www.zenbusiness.com/personal-vs-business-expenses/) - [Best Practices for Business Expense Reports](https://www.zenbusiness.com/expense-report-best-practices/) - [Business Expense vs. Capital Expenditure](https://www.zenbusiness.com/business-expense-vs-capital-expenditure/) - [Expense Definition](https://www.zenbusiness.com/expense-definition/) Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional. ![zenbusiness logo](https://res.cloudinary.com/zenbusiness/q_auto,w_95/v1/shared-assets/s2/logo/zb-mark-full-color.png) The ZenBusiness Editorial Team has more than 20 years of combined small business publishing experience and has helped over 850,000 entrepreneurs launch and grow their companies. The team’s writers and business formation experts are dedicated to providing accurate, practical, and trustworthy guidance so business owners can make confident decisions. Ready to Start Your LLC?
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