The profit and loss statement covers a period, usually a month, a quarter or the financial year. It starts with sales and ends with net profit.
The usual layout
| Line | Example |
|---|---|
| Sales (net of returns, before GST) | ₹1,20,00,000 |
| Less: cost of goods sold | ₹90,00,000 |
| Gross profit | ₹30,00,000 |
| Less: salaries, rent, power, freight out, interest and other expenses | ₹22,50,000 |
| Less: depreciation | ₹1,50,000 |
| Profit before tax | ₹6,00,000 |
Cost of goods sold = opening stock + purchases − closing stock. This is why the closing stock value changes the profit directly.
Reading it well
- Compare months and the same month last year.
- Check gross margin first; overheads second.
- A profit with no cash usually points to receivables or stock.
Format
Companies follow Schedule III of the Companies Act, 2013, which presents the same figures as a "Statement of Profit and Loss". Firms and proprietors use similar layouts for their income tax returns.
A monthly P&L, closed within a week of month end, is far more useful than an annual one that arrives in September.