Profit and Loss Statement (P&L)

Profit and Loss Statement: the report that shows whether a business made money over a period. Also called the income statement.

Tweaxly Team

Learning Center

June 5, 2026·2 min read

The report that answers the simplest and most important question: did the business make money over the period? It reads from the top down, subtracting a kind of cost at every step until you reach what you keep.

Definition

Profit and Loss Statement (P&L) - a financial statement that reports revenue, costs and profit over a period of time (a month, quarter or year). Also called the income statement.

Formula

Revenue
 − Cost of Goods Sold = Gross Profit
 − Operating Costs   = Operating Profit
 − Interest and Tax  = Net Profit

Common uses

Profitability - is the business making money, and is the margin improving
Cost control - are costs growing faster than revenue
Trend - comparing this period against the last

Watch out

A profitable P&L is not the same as money in the bank. Profit is earned on paper when you invoice; cash arrives only when the customer pays. Always read it next to the cash flow statement.

Learn to read all three together in How to Read Your Financial Statements and explore Financial Fundamentals.

Frequently asked questions

What is a profit and loss statement?

A financial statement that summarises revenue, costs and profit over a period of time. It answers the question 'did the business make money?' and is also known as the income statement or P&L.

What is the difference between a P&L and an income statement?

Nothing - they are two names for the same report. 'Profit and loss statement', 'P&L', and 'income statement' all refer to the statement that shows revenue minus costs equals profit over a period.

How do you read a P&L?

Top to bottom. Start with revenue, subtract cost of goods sold to get gross profit, subtract operating costs to get operating profit, then subtract interest and tax to reach net profit - the bottom line.

What are the two most important lines on a P&L?

Gross profit, which tells you whether the core model works, and net profit, which tells you what is actually left after every cost. If gross profit is thin, nothing downstream can fix it.

Does the P&L show how much cash I have?

No. Profit is earned the moment you invoice; cash arrives when the customer pays. A profitable P&L can sit next to an empty bank account, which is why you also read the cash flow statement.

TagsProfit and LossIncome StatementFinancial StatementsNet Profit