What is a profit and loss statement?

A profit and loss statement is a financial report that shows an organization's income, expenses, and profits or losses over a specific period, usually quarterly or annually. Its purpose is to provide insight into the financial performance of a business during that time.

In other words, the profit and loss statement shows how much revenue (income) your business has generated and what expenses have been incurred, such as operating costs, purchase costs, personnel expenses, and interest expenses. Ultimately, it shows the net profit or loss of your business, which is the difference between total income and total expenses.

The profit and loss statement provides a clear picture of how profitable a company is. It helps entrepreneurs and managers understand where money is being earned and where potential losses are occurring. With the information from the profit and loss statement, an organization can make strategic decisions. Think of cost-saving measures, investments in new projects, or price adjustments.

The profit and loss statement is also very important for external parties such as investors, banks, and shareholders. They use this information to assess whether your company is financially healthy and to decide whether they want to invest or provide credit.

Additionally, the profit and loss statement is important for preparing tax returns. It forms the basis for calculating a company’s taxable profit.

In short, the profit and loss statement is essential for monitoring the financial health of your organization and for planning future strategies.

Sustainable success through manageable and controlled growth

The ICR online business software helps entrepreneurs and organizations find balance and peace, through manageable and controlled growth, with the goal of a healthy organization and sustainable success. We do this through the all-encompassing ICR cycle.

Choose our successful approach and start your process to go from ambition to result with the ICR Ambition Refresher!

The comprehensive ICR cycle