Profit and Loss Statement Format (P/L)
The following Profit and Loss Statement Format provides an outline of the most common Income Statement. It is impossible to provide a complete set of examples that address every variation in every situation since there are thousands of such Profit and Loss Statements formats based on geography, accounting policies, etc.
Income StatementsIncome StatementsThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements. and P&L Account are used interchangeably. It is also known as the statement of operationsStatement Of OperationsStatement of Operations, also known as the income statement, displays a Company’s revenues & expenditures for a specified period, i.e., monthly, quarterly, or annually in a standard accounting format in accordance with the accounting policies suggested by the governing body., earnings statement, statement of financial results or income, or expense statement.
The stage at which Profit & Loss Account is prepared
Contents of Profit and Loss Statement Format
There is no particular format for P&L Account under GAAPGAAPGenerally accepted accounting principles (GAAP) are the minimum standards and uniform guidelines for the accounting and reporting. These standards prohibit firms from engaging in unethical business activities and enable for a more accurate comparison of financial reports to investors., IFRS and Indian GAAP. Many customized formats are used. But the P&L Account must include these items:
- Net RevenueNet RevenueNet revenue refers to a company's sales realization acquired after deducting all the directly related selling expenses such as discount, return and other such costs from the gross sales revenue it generated.
- Cost of Goods SoldCost Of Goods SoldThe cost of goods sold (COGS) is the cumulative total of direct costs incurred for the goods or services sold, including direct expenses like raw material, direct labour cost and other direct costs. However, it excludes all the indirect expenses incurred by the company.
- Gross ProfitGross ProfitGross Profit shows the earnings of the business entity from its core business activity i.e. the profit of the company that is arrived after deducting all the direct expenses like raw material cost, labor cost, etc. from the direct income generated from the sale of its goods and services.
- Advertising & Promotion
- Depreciation & Amortization
- Rent and Office Expenses
- SG&A Expenses
- EBITEBITEarnings before interest and tax (EBIT) refers to the company's operating profit that is acquired after deducting all the expenses except the interest and tax expenses from the revenue. It denotes the organization's profit from business operations while excluding all taxes and costs of capital.
- Interest Expense
- EBTEBTPretax income is a company's net earnings calculated after deducting all the expenses, including cash expenses like salary expense, interest expense, and non-cash expenses like depreciation and other charges from the total revenue generated before deducting the income tax expense.
- Income Taxes
- Net Earnings
Profit and Loss Statement Format with Examples
P/L Format #1 – Monthly Statement
The monthly P&L template is suitable for companies that require regular reporting and detail. In this, all the information is shown in a series of monthly columns.
This format is apt for small, medium, and large companies.
Here, XYZ is a US-based company that follows GAAP.
P/L Format #2 – Annual Statement
This type of profit and loss statement format is widely used by companies in operation for many years. This format is suitable for any size company and can easily be customized. It is also useful for analyzing performance YOY.
XYZ is a UK based company in operation for many years.
P/L Format #3 – Indian Company
Indian Companies have to prepare the Profit & Loss Account as per Schedule III of Companies Act, 2013.
In India, there are basically two formats of P&L statements.
- The horizontal format of P&L Account
- The vertical format of P&L Account
In a horizontal format, the “T shaped structure” for preparing the P&L account is used. It has two sides – Debit & Credit.
ABC Ltd. is an Indian company. It prepares the P&L Statement as per the schedule of the Companies Act.
However, in vertical format, there is no use of a T-shaped structure. In this, the figures from trial balance are used.
Khan & Co. The bakery is an Indian company that uses a vertical format for a P&L statement.
Profit and Loss Statement is prepared to ascertain the net profit or net loss made by the company during the accounting period Accounting PeriodAccounting Period refers to the period in which all financial transactions are recorded and financial statements are prepared. This might be quarterly, semi-annually, or annually, depending on the period for which you want to create the financial statements to be presented to investors so that they can track and compare the company's overall performance.. This is one of the most important objectives of the business. This is also important to various other parties. It also summarizes our revenue and expenses, thus analyzing how money has come and how it goes out.
This is a guide to Profit and Loss Statement Format. Here we provide you with the Profit and Loss statement format for the Monthly and Annual P&L with examples. You may learn more about accounting from the following articles –