profit and loss

What Is a Profit and Loss Account?

What Is a Profit and Loss Account?

A profit and loss account details your business transactions, subtracting the total outgoings from the total income to tell you how much, if any, profit you have made. Your profit and loss sheet, unlike a balance sheet, displays the financial health of your company for a period of time – a month, a quarter or a year. A balance sheet only represents your finances at a particular moment in time. If your company is incorporated, you are required by law to produce a profit and loss sheet for each financial year. If your business is not trading as a limited company you don’t have to produce one, but producing a profit and loss statement is nevertheless useful to determine how your business is performing at a glance. What goes into your P&L account? 1. Gross income (the total of all money th... »

Understanding your Profit and Loss Account and Balance Sheet

Understanding your Profit and Loss Account and Balance Sheet

To steer your company in the financial direction you want it to take, you need to understand where you’re making money and where you’re spending it. This is why you should keep accounts and produce regular reports, including a profit and loss account and balance sheet. Your bank manager or other financier will also want to see these when you ask for a loan or other credit. You may also like to read 10 ways to improve your cashflow The benefits of producing accurate profit & loss accounts and balance sheets Your profit and loss account (P&L) shows business performance. It measures how much money you have made, and how you made it, over a given period. Typically, this period is a month or consolidated months over a year. Your balance sheet shows the value of your business, at a speci... »