What is a Profit and Loss Account?
A Profit and Loss Account (P&L) sometimes also referred to as an Income Statement, summarises the revenue, costs and profit or loss of a business over a period of time.
The top section, the trading account, shows the gross profit a business has made from its principal activity (its business). It reports sales for the period less the cost of sales (costs which are directly attributable to the sales) to give a gross profit.
The lower section then lists ‘overheads,’ costs not directly attributable to sales such as heat and light, rent and advertising. These are general costs of running a business and are deducted from gross profit to arrive at an overall net profit or loss.
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