The Statement of Profit or Loss

The statement of profit or loss (otherwise known as the profit and loss account) shows if a business is in profit or loss. It does this by showing the day to day income a business has received and all the day to day expenses the business has incurred over a given period.

The business has made a profit if the total income is more than the total expenditure. If on the other hand the total expenditure exceeds the total income the business has made a loss.

The statement of profit or loss can be summed up by the following equation:

Profit = Income - Expenses