UK Accounting Glossary
The profit and loss statement (or income statement, or P&L) is one of the key financial statements a company publishes. In the US, a profit and loss statement is issued each quarter, and a more detailed profit and loss statement is published each year. The profit and loss statement is like a report card on the company’s activities: it presents the net addition (ie, net income) or subtraction (ie, net loss) to retained earnings from operations over a period of time. The profit and loss statement includes intermediary calculations of income – including gross income, operating income, and pretax income – that are crucial to analyzing company operations. The profit and loss statement also presents earnings per share (EPS), which is central to calculating key valuation measures, like the P/E. The profit and loss statement has its limitations, however. First, the profit and loss statement is for a specific span of time, while a company’s activities overlap time-spans. Moreover, critics say, a profit and loss statement is an artificial accounting construction that can only partly measure a company’s success.
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This glossary post was last updated: 6th February 2020.