Lesson #13 - The Second Statement - THE PROFIT AND LOSS STATEMENT

The Profit And Loss Statement (also known as The Statement of Financial Performance or The Income Statement) shows us how much profit or loss the business made over a period or duration of time, e.g. a year (12 months), a quarter (3 months) or a month.

In other words, did the company or business make money or lose money?

The Profit And Loss Statement made up of REVENUE and EXPENSES.

So, here's another equation for you: -

Profit or Loss = REVENUE - EXPENSES

If REVENUE > EXPENSES = Profit!

If EXPENSES > REVENUE = Loss!

Here's an example of a Profit And Loss Statement.

Unlike the Balance Sheet which gives a "snapshot" of ASSETS, LIABILITIES and EQUITY at a fixed point in time, the Profit and Loss Statement gives an overview of the REVENUE and EXPENSE "flows" over a duration of time (just like a river flowing into a lake).

As REVENUE and EXPENSES flow just like a river in The Profit And Loss Statement, let's listen to Billy Joel's "River of Dreams".

Enjoy!!!