Profit and loss statement

Direct answer

A profit and loss statement (P&L) shows revenue, costs, expenses, and profit or loss for a period. Compare equal-length periods using the same accounting method to see which lines changed. The P&L does not show the full cash position or everything the business owns and owes.

Read it from top to bottom

1. Revenue shows income included under the report’s cash or accrual method.
2. Cost of goods sold captures costs directly associated with the goods or services sold.
3. Gross profit is revenue minus cost of goods sold.
4. Operating expenses cover costs such as payroll, rent, software, and marketing.
5. Net income is the result after the costs, expenses, and other items shown on the report.

When it is useful

Use a P&L to compare periods, investigate margin changes, and find the revenue or expense lines behind a change in profit.

What to verify first

Confirm the accounting method, report dates, and whether the comparison period has the same length. Check unusual transactions behind material changes before assigning a cause.

If the report comes from QuickBooks and the follow-up is about the records behind a change, use the QuickBooks profit dashboard review workflow. It keeps the investigation in a selected, read-only workspace instead of sending each new question back into a spreadsheet export.

Common mistake

Profit is not the same as cash, even on a cash-basis P&L: loans, owner contributions, asset purchases, and other balance-sheet movements can change cash without appearing as P&L income or expenses. On an accrual-basis P&L, revenue and expenses can also appear before cash changes hands. Use the cash-flow statement and balance sheet to investigate liquidity.