Income statement (profit and loss) explained
The income statement, also called the profit and loss statement or P&L, covers a period: a month, a quarter or a year. It starts with revenue, subtracts the costs of earning it and ends with net income, the profit or loss for the period.
A business that sells products usually shows cost of goods sold right after revenue; revenue minus cost of goods sold is gross profit, which shows how much each sale contributes before overheads. Operating expenses such as rent, wages and software come next, then any other income or expenses such as interest.
The same period can look different on the cash and accrual bases, and comparing periods side by side, this month against last month or this year against last year, is where an income statement becomes most useful.
Example: a quarter’s profit and loss
A small retailer’s first quarter:
| Amount | |
|---|---|
| Revenue | $48,000 |
| Cost of goods sold | − $18,000 |
| Gross profit | $30,000 |
| Rent | − $6,000 |
| Wages | − $12,000 |
| Software and subscriptions | − $1,000 |
| Net income | $11,000 |
Gross margin is $30,000 ÷ $48,000 = 62.5%. The $11,000 of net income is what flows into equity on the balance sheet.
Where you’ll see it in fiscal50
fiscal50’s Income Statement runs for any date range, month or fiscal year on a cash or accrual basis, and can show periods side by side with the change in dollars and percent. Related reports compare it with the same period last year, show each line as a percentage of revenue, or split it by location and special category.
Click an account name to open the transactions behind it.