What Is a Profit and Loss Statement? (And Why Every Business Owner Needs One)
You finally sit down to look at your QuickBooks reports. You open something called the Profit and Loss Statement... and then stare at it like it’s in another language.
You’re not alone.
This is one of the most common questions I get as a QuickBooks ProAdvisor:
"Dr. Raya, what exactly is a Profit and Loss Statement—and why do I need it?"
Let’s break it down (without the boring jargon).
What Is a Profit and Loss Statement?
Also called a P&L or Income Statement, this report shows:
📅 Your business’s income, expenses, and profit (or loss) over a specific time period—usually monthly, quarterly, or yearly.
It’s basically your business’s financial scoreboard.
At its core, it looks like this:
Revenue (Sales)
– Expenses
= Net Profit (or Loss)
Common Terms on a P&L:
Revenue (Income): The money you bring in from selling goods or services.
Cost of Goods Sold (COGS): Direct costs to produce your product/service (like materials or subcontractors).
Gross Profit: Revenue – COGS.
Operating Expenses: Day-to-day business costs (marketing, software, rent, etc.).
Net Income (Profit): What’s left after all expenses are paid.
This report is crucial to understanding how your business is performing—and it’s often the first thing your CPA, lender, or investor will ask to see.
Common Mistakes I See on P&L Reports:
Misclassifying Credit Card Payments
Paying your business credit card isn't an expense—what you bought with it is. If you log the full payment as an expense, you’re doubling your costs.Uncategorized Income
Income not tied to a category may show up as “uncategorized,” making your revenue look smaller (or messy).Personal Expenses Mixed In
It’s tempting to swipe that business card for groceries, but mixing personal and business expenses causes confusion—and can cause problems at tax time.Missing or Duplicated Transactions
Without monthly reconciliation, your P&L could show incorrect numbers that affect everything from budgeting to taxes.
FAQs About the Profit and Loss Statement:
Q: Do I really need to look at this every month?
A: Yes! Reviewing your P&L monthly helps you spot trends, make smarter decisions, and avoid financial surprises.
Q: Why doesn’t my profit match my bank account?
A: Because your P&L doesn’t include loan payments, credit card balances, or owner draws. That’s what your Balance Sheet is for.
Q: Should I include unpaid invoices in my revenue?
A: It depends. If you use accrual accounting, yes. If you use cash basis, only count income when it’s actually received.
Why This Matters
Your Profit & Loss Statement is more than just a report—it’s a roadmap. But if it's messy, wrong, or ignored… you could be running your business in the dark.
✅ I’ve helped service-based entrepreneurs all over the U.S. clean up their P&L reports, understand their numbers, and even save over $200,000 in taxes in 2025 alone.
📞 Ready to take control of your finances?
Book a free 30-minute call with me, Dr. Bryan Raya, a Certified QuickBooks ProAdvisor, and let’s clean up your reports and start Doing Business Right.
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