As boring and plain as profit and loss statements may seem to business owners, their importance cannot be undervalued or replaced.

We know that a profit and loss statement is also known as an income statement, and how is income determined? With 2 key factors – Revenue and Expenses. These statements can cover any period, but it is more commonly done monthly/quarterly/ or annually.


Your profit and loss statement is split in 2 sections:

  • Revenue – which is all the income from your primary business activities (the sales of your products and/or services), any secondary activities like interest from the bank, and any other financial gains gained during the period like the profit on the sale of assets.

  • Expenses – are what the business is spending on primary activities, like materials and cost of labour, and any secondary activities or any type of losses within the period, e.g. losses on disposal of assets.


The term profit has many different meanings and each one uses a different formula to get there.

For those with a business degree, this will take you back to first year Uni and that accounting class you swore you would never need again.

Using your P & L, we can extract important figures which ultimately show your business’s profitability.

If you still find yourself confused when your Accountant talks you through your Profit and Loss Statement, you can always call one of our team members and we would be happy to give you are more in depth explanation.