A profit and loss statement, also called an income statement, is a primary financial statement used to illustrate the profits or losses a company experiences during a period. Many organizations create a profit and loss statement each month, quarter and year. A yearly profit and loss statement shows the amount of revenue a company earned for the year as well as all of the expenses it incurred during that year.
Review the general ledger. A general ledger is a book an organization keeps that tracks every account the business uses. The company posts all transactions into this book, by account, and a running balance of each account is calculated. The general ledger has several different sections in it to separate the accounts by their type. These include assets, liabilities, equities, revenues and expenses.
Label a blank ledger form. For a profit and loss statement, write the company’s name at the very top. Below that, write the type of financial statement it is and the period that the statement covers.
Copy all of the revenues from the year. Look in the general ledger and locate the revenue section. Your organization might have one revenue account or several. Copy down the names of the revenue accounts and each account’s balance. List these on the first several lines of the profit and loss statement.
Add up the revenue amounts. Under the last revenue listed on the profit and loss statement, write in “Total Revenues” and include the amount.
Copy all of the expenses. Look in the general ledger and locate the expense section. List each expense account and its balance on the lines below the revenue amounts on the profit and loss statement.
Add up the expense amounts. Under the last expense listed, write in “Total Expenses” and fill in the amount.
Subtract the expenses from the revenues. If revenues are higher than expenses, your company experienced a net profit. If revenues are lower than expenses, your company experienced a net loss. Write in this amount and label it either “Net Profit” or “Net Loss.”