Income statement
The Income statement (often called the Profit and Loss account, or P&L) shows your business income and costs for a chosen period. It focuses on performance, not on cash movements; cash is shown in a separate cash flow statement.
Simple structure
Sales − cost of sales = gross profit; gross profit − operating expenses = profit for the period.
A basic Income statement usually includes:
- Revenue (sales)
- Cost of sales or direct costs
- Gross profit
- Operating expenses (e.g. admin, marketing, wages)
- Operating profit
- Other income and expenses, including finance costs
- Tax expense (if applicable)
- Profit for the period
In the UK it is commonly called the Profit and Loss account, and under international wording you may see “statement of profit or loss and other comprehensive income”. Small entities often keep a simple layout; amounts are usually recognised on an accrual basis, when earned or incurred, rather than when cash is received or paid.
