LESSON FOR THIS WORKSHEET
A profit and loss statement, also known as a
P&L, or income statement, gives a measurement of the activity of a
business over some period of time, including a month, quarter, or
The P&L is important, because it tells the
profitability of a business The profit and loss statement's
main items are revenue, expenses, and profit (or loss).
The basic format (template) is:
- cost of goods sold
= GROSS PROFIT
- operating expenses
= OPERATING INCOME
+/- other income or expenses
= EARNINGS BEFORE TAXES
- income taxes
= NET EARNINGS
REVENUE is compensation received for
your product or services.
COST OF GOODS SOLD are the variable
expenses related to the sale of your product.
OPERATING EXPENSES are fixed expenses,
such as rent, and utilities.
OPERATING INCOME is profit after
EARNINGS BEFORE TAXES is income
including other income and expenses, but before taxes.
INCOME TAXES are federal, state, and
NET EARNINGS is the profit earned by the
business, and it includes all expenses, including taxes.