FAQ: What Is a Profit and Loss Statement (Income Statement)? Answers for Small Business Owners
If you’ve ever typed “What is a profit and loss statement?” or “How to read an income statement?” into Google—you’re not alone.
As a bookkeeping professional and small business consultant, I’ve helped dozens of overwhelmed business owners figure out this exact report.
Let’s answer the most commonly searched questions about this important document so you can better understand your numbers, avoid mistakes, and make smarter decisions in your business.
✅ What is a Profit and Loss Statement?
Also called an income statement, a P&L shows how much money your business made and spent over a certain time period—usually monthly, quarterly, or yearly.
Think of it as your business’s report card:
Revenue – Expenses = Profit (or Loss)
📌 What Does a Profit and Loss Statement Include?
Your P&L will typically list:
Revenue (or Sales): All the money you earned.
Cost of Goods Sold (COGS): Direct costs to deliver your product or service.
Gross Profit: Revenue minus COGS.
Operating Expenses: Overhead like rent, software, advertising, etc.
Net Income (or Net Profit): What’s left after all expenses.
🤔 Why Is a P&L Statement Important?
Tax Prep: Your CPA will ask for it during tax season.
Business Loans: Lenders need to see it to evaluate your financial health.
Decision-Making: You can’t improve what you don’t measure.
🧾 Is the Profit and Loss Statement the Same as the Income Statement?
Yes! “Profit and Loss Statement” and “Income Statement” are two names for the same financial report.
🧠 What’s the Difference Between a P&L and a Balance Sheet?
A P&L shows income and expenses over time.
A Balance Sheet is a snapshot of what your business owns and owes on a specific date.
They work together to give a complete financial picture.
🚨 What Are Common Mistakes on Profit and Loss Statements?
Misclassifying Credit Card Payments: The full payment isn’t an expense. The items you bought are.
Uncategorized Transactions: These muddy your totals and confuse tax prep.
Mixing Personal and Business Expenses: Don’t do it! It ruins report accuracy.
Missing Revenue Sources: Always check that all income is recorded and categorized properly.
🧮 How Often Should I Review My P&L?
Monthly is best. It helps you catch issues early, monitor growth, and stay financially confident.
🧑💼 Do I Need a Bookkeeper for This?
If managing your P&L feels like decoding ancient scrolls, you’re not alone.
That’s where I come in.
As a Certified QuickBooks ProAdvisor, I help entrepreneurs clean up their books, understand reports, and use data to grow their business.
📞 Need Help with Your P&L or Income Statement?
Let’s simplify your numbers together.
👉 Book a FREE 30-minute call with me, Dr. Bryan Raya, and let’s start Doing Business Right!
Schedule here
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