What is a profit and loss statement or Income Statement? Definition with Examples

Profit and Loss Statement Definition:

Under financial accounting, “profit and loss account, statement of revenue or loss, financial performance statement, operating statement, earnings statement, statement of profit and loss, P&L statement, Income statement all this terms refers to Profit and Loss statement of the financial reports”. This statement shows the revenue and expenditures of a business during an accounting year. Primary purpose of preparing income statement is to present summary of profit and loss of the business or an organisation to the members directly or indirectly linked with business. For example: Entities like Investors, Banks, Competitors, Board of directors, shareholders are concern about overview of profit or loss of the business for various objectives.

There are institutions like non-profitable organizations or a charitable organization does not intend to prepare income statement. Since their motto of the business is not to earn profits or showcase earnings. Perhaps these intuitions prepare statement which summarizes information related to source of funds and expenses incurred for various programs or initiatives. Such statement is known as “statement of activities”.

There are two methods of preparing income statement. First one is the simple procedure subtracting expenditures from income to evaluate profit or loss for a specified period. Else second procedure is to first calculate gross profit, then evaluate general and operating expenses, then calculating operating profit, then profit before taxes and lastly profit after taxes to summarize net income of the business.

Example of Profit and Loss Statement:

Let us take an example of income statement / profit and loss statement to further understand:

P&L / Profit and Loss Statement Example: Simple Method:

XYZ Textile India Pvt. Ltd.

Income Statement / Statement of Profit and Loss

P&L statement for the current assessment year.
ParticularsDebit (Rs.)Credit (Rs.)
Gross Profit5,20,000
Bank Charges & Other Fees5,344 
Bookkeeping Salaries7,550 
Entertainment expenses10,750 
Insurance Premium5,950 
Professional and Legal Charges6,775 
Postage payments5,832 
Printing and Stationery expenses5,520 
Rent paid18,200 
Material Costs79,600 
Telephone and Mobile Bills6,200 
Net Expenses-2,63,112
Net Income (Net Profit / Loss)2,56,888

Wiki Finance pedia - e-learning course on Accounting Wikipedia Chapter - Learn about profit and loss statement - Income Statement - P&L statement

P&L / Profit and Loss Statement Example: Advanced Method:

PQR Petroleum India Pvt. Ltd.

Statement of Income / Profit and Loss Statement

P&L statement for the current assessment year.
ParticularsRs. in ‘000Rs. in ‘000
Cost of goods sold-2,500
Other sales costs-1,500
Gross Profit46,000
Overhead expenses-1,000
Other expenses-5,000
Operating Profit and Loss 40,000
Interest Charges-500
Net Profit (before Taxes)39,500
Net Profit after Taxes35,500


- Tutorial Course - Basics of Accounting for Beginners -

» e-Learning Chapter 1: What is Accounting with Examples

» e-Learning Chapter 2: Objectives of Accounting

» e-Learning Chapter 3: Types of Accounts

» e-Learning Chapter 4: Branches of Accounting

» e-Learning Chapter 5: Accounting Process

» e-Learning Chapter 6: What is Assets and Current Assets?

» e-Learning Chapter 7: What is Liability and Current Liabilities?

» e-Learning Chapter 8: What is Revenue and Expenses?

» e-Learning Chapter 9: What is a Single Entry System?

» e-Learning Chapter 10: What is Double Entry System?

» e-Learning Chapter 11: What are Journal Entries? Format and Examples.

» e-Learning Chapter 12: What Is a General Ledger? Format with Example.

» e-Learning Chapter 13: What is a Trial Balance? Examples and Limitations.

» Currently Reading: What is a Profit and Loss Statement or Income Statement?

» e-Learning Chapter 15: What is a Balance Sheet? Definition, Format and Examples.

» e-Learning Chapter 16: What is Managerial Accounting? Role, Job and Objectives.

» e-Learning Chapter 17: Accounting Quiz – Basics of Accounting for Beginners Module.


2 thoughts on “What is a profit and loss statement or Income Statement? Definition with Examples”

  1. Avatar

    Having read this I think it is extremely enlightening. I appreciate you taking the time and energy to get this informative article together. I’ve been exploring for somewhat for any high-quality articles related to profit and loss statement format and at last found this site. Reading this info So i am satisfied to express that We have a tremendously good uncanny feeling I discovered exactly things i needed.

  2. Avatar

    Excellent information you have provided in the article. This type of site can be useful for people that wants to inexpensively have their very own home-based business in a number of niches. Just about everyone needs extra form of income.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scroll to Top