What Is a Profit & Loss Form?

A profit and loss form, also called an income statement, is a financial statement showing a company's income and expenses. It is used to calculate a company's net profit or net loss from the operations of the business.

Purpose

• A profit and loss form is used as a summary of a company's income and expenses for a specific period. It summarizes these items and calculates the company's net profit or loss for that period. It also shows the company's cost of goods sold and profit before and after paying taxes on the income.

Details

• A profit and loss form begins by stating the title of the report, the company's name and the time period the report covers. It lists the net sales, gross margin, net profit before taxes and net profit after taxes. Profit and loss statements are typically calculated every month, quarter and year.

Process

• To complete a profit and loss form, the net sales are listed. The cost of goods sold is calculated. This amount is subtracted from the net sales, leaving an amount that represents gross margin. All expense categories and amounts are listed and added up. This amount is subtracted from the gross margin, calculating the company's net profit. Tax amounts of this income are calculated and subtracted from the net profit. The final number on this form is the net profit after taxes.