The Profit and Loss Account

The Profit and Loss statement (P&L) is generally prepared annually and forms part of the accounting documents a limited company and sole trader need to produce to satisfy the tax authorities.

It shows revenues and costs and how much profit has been made by the business over the period it has been prepared for.

Anyone can prepare the statement although most businesses choose an accountant and is part of the general bookkeeping set which also includes a Balance Sheet and cash flow forecast. The general headings include gross profit, net profit, operation profit and profit before tax. You can prepare a simple P&L yourself by developing an excel spreadsheet using the sample headings that are shown below.

Example Profit and Loss and Notes

Here's an example and format of a profit and loss account that shows the standard headings and the notes for further analysis. The template is the same whether you are a sole trader or limited company and any questions should be put to your accountant. A consolidated profit and loss is the same format but generally consolidates a couple of business streams.

1:Income/ Revenue/ Sales10,000
2:Cost of sales4,000
3:Operating Profit6,000
4:Other direct costs1,000
5:Gross profit5,000
8:Profit before tax and interest (EBIT)2,000
11:Net Profit after tax1,000

Notes to the Accounts

Here are notes for the above P&L