If you don’t know what the definition of a P&L Statement is it means Profit & Loss Statement. It’s basically a formal breakdown of what a business’s financials are. It gives you a semi detailed view of what the business made in revenue, costs and expenses.
How A Profit & Loss Statement Works.
Okay let’s say you made $500,000 in your company that will be considered our total revenue. Now let’s subtract your COGS aka Cost Of Good Sold. This could be $100,000 now your grow profit is $400.000 but this is not where it ends at.
Next you have to calculate your selling and operating expenses lets say it was $50,000now your total revenue is $350,000. Lets say you have you had some admin costs this year that came out to around $30,000 so your total operating income Is $320,000.
Lets say you took out a loan and you have to pay your interest expenses of lets say $20,000 so now your income before taxes Is $295,000. Your income tax expense is $103,250 so after all said and done your net income will be $191,750.
You should analyze your Profit & Loss Statements over time to see your trends of cost of goods and profit at the end of the day. So basically your P&L Statement is a great way to keep track of your profitability as a business and can help you secure more funding if you’re looking to expand your business at some point.
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What Is A Profit & Loss Statement
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