Profit and Loss

A profit and loss account is a financial statement which summarises the revenue and expenses of a business for an accounting period and shows the overall profit or loss.

The profit and loss account – also known as the profit statement – uses information from the accounting records as shown by the trial balance:

• the sales (or turnover) of the business.
• the purchases made by the business.
• the overheads of running the business, such as administration, wages, rent paid, telephone, interest paid, travel expenses, etc.

The amount of sales is the revenue of the business, while the amounts of purchases and overheads are the expenses of the business.