Profit and Loss Statement.

In plain English

A profit and loss statement (also called a P&L or income statement) is a financial report that summarizes your business's revenue, costs, and expenses over a specific period, such as a month, quarter, or year. It starts with total revenue, subtracts the costs of running the business, and ends with net profit or net loss, the bottom line. It answers the basic question: did the business make money or lose money during this period? Banks, investors, and the business owner all use it to judge how the business is performing.

01Why it matters

A P&L tells you whether your business is actually profitable or just busy, and it is one of the first documents a lender or buyer asks to see.

02The math, step by step

A coffee cart's P&L for the year shows $90,000 in revenue, $30,000 for coffee and supplies, and $40,000 for rent, wages, and other costs. Subtract $70,000 in total costs from $90,000 in revenue and the bottom line is $20,000 in net profit.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT