A profit and loss report, also known as an income statement or P&L statement, is a financial statement that summarises the business’s revenues, costs, and expenses over a specific period. The purpose of the report is to show whether the business has made a profit or a loss during that period.

Here are the basic elements of a profit and loss report:

Revenue: The money that the business has earned during the selected period. It includes sales revenue, fees, interest income, and any other money the business has received.

Cost of goods sold (COGS): The cost of producing or purchasing the products or services that the business sells. It includes the cost of raw materials, labour, and any other expenses directly related to producing or purchasing the products or services.

Gross profit/loss : The difference between revenue and cost of goods sold. It represents the amount of money the business has left over after paying for the cost of producing or purchasing its products or services.

Operating expenses: The expenses the business incurs while running its business, such as office expenses, salaries, advertising, accounting, and insurance.

Net profit or loss: The business ‘s profit or loss after deducting operating expenses from gross profit. If the net profit is positive, the company has made a profit. If the net profit is negative, the company has made a loss.

It’s important to note that a profit and loss report only shows a snapshot of the business’s financial position over a specific period of time. It doesn’t take into account things like long-term investments or liabilities.