A Profit and Loss (P&L) statement is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a quarter or fiscal year. It is also known as an income statement, statement of profit, statement of operations, and a profit and loss report. The P&L statement is one of three financial statements that every public company issues quarterly and annually, along with the balance sheet and the cash flow statement. The statement is prepared using the cash method or accrual method of accounting.

The P&L statement is important because it provides information about a company’s ability or inability to generate profit by increasing revenue, reducing costs, or both. Company managers and investors use P&L statements to analyze the financial health of a company. The statement summarizes all the activity recorded in a businesss income and expenses accounts over a specified time. Income typically includes sales while expenses might cover things like payroll, advertising, rent, and insurance. The P&L statement will include all sales, including credit sales that customers might not have paid yet, and bills for expenses that have been incurred but not paid.

The P&L statement can be used to calculate profit margins, which show how good the business is at converting revenue into profits. It is important to compare P&L statements from different accounting periods, as any changes over time become more meaningful than the numbers themselves.