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Home Definitions

What is a Profit and Loss Account? Definition or Meaning

Posted by Bizversity

A profit and loss account, also known as a P/L statement is a document that outlines whether or not a company has made a profit in a particular period. It can show the items that contributed to a profit or loss including the cost of goods sold and operating expenses. Altogether, these costs will add up to either be a positive or a negative number.

For example…

When Janine calculated her profit and loss account, she was surprised to learn she had made a minor profit from running her nutrition consultancy business. Working part-time, Janine had not realised that she had generated slightly more revenue than what she had spent on maintaining and providing that business. Operating expenses for Janine included continuing development courses, time spent producing nutrition plans as well as costs such as rent and electricity to power her office. It was a good thing that Janine recorded and tracked her invoices and payments well, including adding a margin for specialised services like sourcing supplements for clients.

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