What is a profit and loss statement?

Profit and loss statements generally cover the timeframes of a quarter or full fiscal year. Profit and loss statements are used in conjunction with cash flow statements, and balance sheets. These documents are also normally created on a quarterly basis or at the end of a fiscal year.

Most profit and loss statements include the following elements:

• Company revenue/income

  This item represents the total amount of money earned by a company from the sales of its products and/or services. Most companies choose to use the gross revenue, and save the net revenue, or net income, to be determined in the final section of the profit and loss statement. This would then represent the total amount of revenue for the company.

• COGS

  COGS refers to the cost of materials and/or resources that are needed for a company to manufacture or produce its specific product or service. The amount of money companies spend in this area is highly varied, and depends upon the specific company, its industry, the size and scope of the business, and what products and/or services it provides.

• General expenses

  The general expenses of a profit and loss statement can also be highly varied depending on the specific company. These are costs that are related to the business operations of the company and many other key issues where money is used. It normally includes things like payroll, hardware, machine maintenance, travel, and other business overhead costs.

• Other expenses and revenue

  The other expenses and revenue section of a profit and loss statement refers to any costs or income incurred through transactions or activities that are not directly related to a company's daily operations, and specific objectives and goals.

• The bottom line

  As was touched on above, the bottom line represents the net income portion of the profit and loss statement. This is the section and item entry in which the company deducts all of its costs and expenses from its gross revenue to get the net revenue figure. This may result in a total profit or total loss for the company, hence the name profit and loss statement.