3-minute read
Completing a profit and loss statement is a legal requirement for limited companies, and gives you an indication of the health of your business.
Read on for some profit and loss account examples and tips on how to complete one for your business.
Also known as a profit and loss account or P&L, a profit and loss statement calculates your business’s net profit or loss for a period of time.
A profit and loss account can give owners a sense of their business’s finances, helping them to identify inefficiencies and potential improvements.
A company’s P&L is complemented by its balance sheet and cash flow statement to give an overall picture of how it's performing.
Business owners often use a profit and loss account to identify:
It could also help a business to get investment such as crowdfunding or venture capital funding.
Read our guide on how to calculate profit margin for more information on the difference between gross profit and net profit.
If you own a limited company, you’ll need to create a profit and loss statement for HMRC each financial year.
Sole traders aren’t required by law to create a P&L, but will give most of the same information when completing their Self Assessment tax return.
Regardless of their structure, most businesses produce a profit and loss statement each quarter and at the end of each financial year.
A profit and loss sheet shows the financial position of your business over a period of time, such as a month, a quarter, or a year.
It gives you a clear picture of your company’s income and expenses, plus whether you’re making profit or losing money.
A P&L shows the demand for your product or service, set against all the costs you incur to provide it.
On the other hand, a balance sheet shows how your business is performing at a particular moment, and how effectively you’re using your resources.
A balance sheet outlines details such as:
Read more about how balance sheets work and download our free balance sheet template.
When completing a profit and loss statement, you’ll need to keep a record of:
Once you have these details for the period you’re measuring, you’ll need to subtract your costs, overheads, and tax from your gross income to calculate a net profit or loss.
You can work out your P&L on a basic spreadsheet, but most basic accounting systems will include a profit and loss account. Read our guides to the best accounting software and bookkeeping for small businesses to get started.
Here’s an example of a profit and loss account for a business over a three-month period:
Remember, most tax and accounting software will be able to work this out for you as long as you keep accurate records.
Getting your accounts right is crucial for business owners, so make sure you speak to a professional accountant or business finance expert if you’re not sure of anything.
Using a simple profit and loss account template can help you to work out your business’s P&L for any time period.
Zoho Finance has a profit and loss template that your business can use to work out how much money you’re making, profit margins, and how costs are affecting your income.
Read our guides on accounting and reporting for more tips on how to run your business smoothly:
Do you have any unanswered questions about completing a profit and loss account for your business? Let us know in the comments below.
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Conor Shilling
Conor Shilling is a Copywriter at Simply Business with over two years’ experience in the insurance industry. A trained journalist, Conor has worked as a professional writer for 10 years. His previous experience includes writing for several leading online property trade publications. Conor specialises in the buy-to-let market, landlords, and small business finance.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
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