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A profit and loss statement, sometimes referred to as a P & L, is an important document for a business.

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Sample Profit and Loss Statement

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Profit And Loss Statement: What Is It?

What Is a Profit and Loss Statement?

A profit and loss statement is a financial document used by businesses. During a certain period of time, usually a quarter, a profit and loss statement lists all of the accounts receivable and accounts payable of a business. The profit of a business is defined as money that is available once the company subtracts all of its expenses from the incoming funds. A loss is something that a company does not get paid for. Two common losses include delinquent accounts and depreciation of assets.

A profit and loss statement can be used for many purposes. A profit and loss statement may be used by the owner or corporate officers. It may even be generated and discussed during shareholder meetings. It can show a company where it has grown and where there needs to be improvement. For business owners who need financial backing, a profit and loss statement may be requested by potential investors or loan officers. It enables people to determine whether you will be able to pay back the loan or the investment.

A profit and loss statement includes:

  • Net sales
  • Cost of goods or services
  • Gross margin
  • Operating expenses
  • Net profit

What Are the Formulas Used in a Profit and Loss Statement?

Because a profit and loss statement is a financial document. There are simple math formulas that you can use to determine your gross margin, net operating profit, net profit before taxes, and your actual net profit.

  • Gross margin = Net sales – cost of goods or services sold
  • Net operating profit = gross margin – operating expenses
  • Net profit before taxes = net operating profit + any other income – any other expenses
  • Net profit = net profit before taxes – taxes

Frequently Asked Questions

  1. Who should prepare the profit and loss statement?
  • A profit and loss statement can be prepared by the owner of the company or the accountant. Some accounting programs can also help you put together a profit and loss statement. FormSwift’s profit and loss statement template is created for business owners who need to easily create the document and do not have access to a program generated option.
  1. Should I create a profit and loss statement on a monthly basis?
  • You can do that if you want. If your business is new, creating a monthly profit and loss statement can help you determine where you need to cut expenses. However, most companies create a profit and loss statement on a quarterly basis.

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Profit and Loss Statement

A profit and loss statement is a financial statement that is prepared for a business. A profit and loss statement covers a stated amount of time (such as a quarter or a month) and lists the revenue, all costs, and expenses that are associated with the business during that period of time.

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Balance Sheet

A balance sheet can give a business an idea of its financial health during a listed period of time. The balance sheet shows the assets, the liabilities, and capital that is available in the business.

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Income Statement

Businesses create income statements as a way to review their revenue and their expenses. Income statements are generated to cover revenue and expenses for a certain amount of time.

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Purchase Order

A purchase order is a document between a buyer and a seller. The purpose of a purchase order is to act as a physical inventory of the goods that are being sold by the buyer to the seller. It should include the date the agreement was made, the items being sold, the price for each item, and the identities of the buyer and the seller.

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