Income Statement
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Profit and Loss
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P&L Statement
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Income Statement
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Profit and Loss
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P&L Statement
An income statement shows how much money came in (revenue), what you paid for (expenses), and what is left over (profits) for a specific time period. An income statement can also be called a profit and loss statement, P&L, statement of earnings, or statement of operations. Sometimes the word consolidated is added, but it’s still an income statement. The net profit, also known as net income or net earnings, is the bottom line of the income statement.
Income statements have a standard format, and while some companies may have additional items, here are the basics.
Amounts shown are in thousands
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Revenue $ 100
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Cost of Goods Sold $ 50
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Gross Profit $ 50
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Operating Expenses $ 30
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Operating Profit, EBIT $ 20
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Interest $ 3
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Taxes $ 5
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Net Profit $ 12
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Revenue $ 100
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Cost of Goods Sold $ 50
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Gross Profit $ 50
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Operating Expenses $ 30
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Operating Profit, EBIT $ 20
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Interest $ 3
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Taxes $ 5
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Net Profit $ 12
• Revenue, also known as sales, is the amount of money a company earns from providing products or services to customers. Some companies categorize their revenues to track where the money is coming from.
• Cost of Goods Sold (COGS), also known as Cost of Sales (COS) or Cost of Revenue, refers to the expenses directly associated with the production of a product or service.
• Gross Profit (GP) is calculated by subtracting the cost of goods sold (COGS) from the revenue. This tells you how profitable the product or service you are offering is. In our example, the revenue is $100 and the COGS is $50, resulting in a Gross Profit of $50.
• Operating Expenses are the costs that keep a business running smoothly. These costs include rent, utilities, salaries, benefits, and insurance. Most companies categorize these expenses to show where the money is being spent. For example, Apple breaks down their operating expenses into Research and Development, Selling General and Administrative, Non-Recurring, and Other.
• Operating Profit, operational income, or EBIT (earning before Interest and taxes) is calculated by subtracting operating expenses from gross profit. This is the profit made from running the business.
• Taxes, Interest, Other – This category includes interest expenses paid on loans, business taxes for the year, and other miscellaneous expenses
• Net Income, net profit, net earnings, or the bottom line, is the remaining amount after subtracting all the costs from revenue. Hopefully it’s a positive number, if not, then it’s a Net Loss.
In training classes, you will learn about key words used in income statements. This will help you understand your company’s earnings, expenses, and costs.
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