Perhaps the most popular of the Big Three Financial Statements is the profit and loss statement (commonly referred to as your P&L or income statement). This report tells you if your company is profitable or not over a given period of time. It begins with a summary of your revenues, followed by your expenses and costs, and concludes with your net profit.
Here’s a quick overview of how the P&L works:
Cost of Goods Sold (COGS) - Revenue = Gross Profit
- Revenues = Sales
- Cost of Goods Sold = direct cost of delivering your service or product
- Gross Profit = what’s leftover to cover other costs needed to run your business
After identifying your gross profit, the P&L outlines all operational spending and income. Operating expenses are all of the expenses incurred to run your business, such as rent, salaries, travel, and marketing expenses.
Gross Profit - Total Operating Spending = Net Profit / Net Loss (what’s left).
With this report, you can easily identify your company’s sources of income and expenses to make informed financial decisions. For example, Jane Smith at Lyon’s Den is concerned that her business spends too much money on travel, so she’ll use the P&L to prove it.
Step 1: On the left navigation, hover over Reports and click Profit & Loss.
Step 2: Adjust the Period and Date Range, in the top panel, to focus on a particular time frame. Here, Jane adjusts the Period to Monthly and the Date Range to This year.
Step 3: You can further customize your P&L with Dimensions to view transactions associated with select projects, locations, or personnel to refine your data. Since Jane is interested in travel, she decides to keep the Dimensions set at the default setting to ensure she can view all transactions related to trips.
Note: Dimensions is not a standard feature at this time. If you're interested in adding it to your account, just let your Controller or Assistant Controller know!
Step 4: Finally, select the Financial Account, in the top panel, to view a specific credit card or bank account. Jane selects Central Bank of Portland as she knows all travel expenses are paid out through this bank account.
Click Update to see the changes reflected on the P&L.
Here you can dive into the three sections of the P&L - Revenue, Cost of Goods Sold (COGS), and Spending. Each section gives you a deeper understanding of where your money is going day-to-day.
At the bottom of the P&L, you will see your Net Profit (revenue - spending), which is a simple analysis of your company’s profitability.
Step 5: To dive deeper into your P&L, click the gear icon in the upper right corner.
Here you can choose to view account numbers in each line item.
You are also able to view zero account balances. The default setting for your P&L hides any accounts with no balances, so for example if your Sales Discount for Revenue is at $0, by default you won’t see this account at all in your P&L unless you select Show 0 Balance Accounts.
Step 6: Once you’ve finished the review of your P&L, you can export your report. Go to the upper right corner near the gear icon and click on Export. Here, Jane selects Management Report to export her travel analysis in a shareable format perfect for presenting to her board of directors.
Note: The Detailed option for CSV expands each category to include transactional data. The Management Report downloads as a full Excel report including separate tabs for the Accounting Policy, Financial Highlights, Balance Sheet, P&L, Cash Flow Statement, and Journal Entries.
With your P&L in hand, you now have the best view into your company’s bottom line, and whether you’ve made or lost money. Don’t forget, the P&L is just one piece of the pie. The Balance Sheet and Cash Flow Statements make up the remaining two of the Big Three Financial Statements.