A profit and loss statement is a financial report that summarizes an entity's revenue, costs, and expenses over a specific period, typically prepared monthly or annually. It calculates profit or loss by subtracting expenses from revenue, and is essential for assessing business performance and financial health. Comparing these statements across different periods can reveal critical trends in financial performance, emphasizing the importance of professional advice for interpretation.

1. What is a Profit and Loss
Statement
Leigh Barker

2. A profit and loss statement is a financial
statement that..
A profit and loss statement is a financial statement that reports on revenue,
operating costs and expenses incurred by an entity within a nominated period
of time. It is generally prepared at regular intervals usually monthly and at
financial year end and is used for monitoring business activity and highlights
where an entity is succeeding and where it is struggling.

3. Profit and loss statements follow a general
format
Profit and loss statements follow a general format.They commence with
revenue that is earned during an accounting period which generally are such
items as sales or service fees.Then there are expenses incurred during that
same accounting period which generally comprise such transactions as the
cost of goods sold, rent, salaries, advertising etc.

4. Revenue less Expenses = Profit/Loss
The basic equation for every profit and loss statement is Revenue less
Expenses = Profit/Loss.
It is incumbent on all business entities to generate revenues to remain in
business as revenues are applied to paying business expenses, employee
costs, and interest repayments for loans etc.

5. It is important to compare profit and loss
statements
It is important to compare profit and loss statements from different
accounting periods as the changes in revenues, operating costs and expenses
over time may be more important than the numbers themselves.
Whereas accountants use the profit and loss statement to gauge the accuracy
of financial transactions others use this information to judge an entities health
whereas the entity itself can review the statement for productive purposes.

6. Leigh Barker Accountant
Please note: Prepared by Leigh Barker Accountant at MWC Group,Tangible
Assets, Portfolio Finance, Gordon andWest Pennant Hills. Note that all
content of this blog is general in nature and anyone intending to apply the
information to practical circumstances should seek professional advice to
independently verify their interpretation and the information’s applicability to
their particular circumstance.