A Profit and Loss (P&L) statement summarizes the sales, costs, and expenses over a period of time to arrive at a final net profit or net loss value. Also known as the income statement or the statement of profit and loss, the P&L provides potential investors with an understanding for how revenues are used in operations. It also provides insight on company taxes and interest expense which are usually included at the end of most P&L statements.
Determine the sales or revenues. Let's say the sales for XYZ company are $100,000 this year.
Subtract the cost of goods sold (COGS) from sales for gross profit. The cost of goods sold are all costs directly related to production. Let's say the COGS for XYZ Company are $10,000.
Subtract operating expenses. These are generally fixed overhead costs. Common examples include administrative labor, utilities and rents. The answer is referred to as operating profit. The operating expenses for XYZ company are $5,000.
Subtract out taxes and interest expense from operating income for net income. Taxes for XYZ company are $15,000 and interest expense is $5,000.
Calculate the Profit or Loss. For XYZ company the answer is $100,000 - $10,000 - $5,000 - $15,000 - $5,000 = $65,000. If the number is positive the company in profit, however, if the number is negative the company is running a loss.
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