Profit and Loss Statement (P&L)
Also known as: P&L, Income Statement
A profit and loss statement shows revenue, costs, and expenses over a period of time, ending with the profit or loss that is left.
What it actually means
The P&L, also called an income statement, answers whether the business made money over a stretch of time. It starts with revenue, subtracts cost of goods sold to give gross profit, then subtracts operating expenses like rent, payroll, software, and advertising to arrive at net profit. Read one month in isolation and you learn little; read twelve side by side and patterns appear — a category creeping upward, a seasonal dip, a margin eroding quietly. Its accuracy depends entirely on the bookkeeping underneath: unreconciled accounts and loose categorization produce a confident-looking statement that means nothing.
$40,000 revenue minus $16,000 cost of goods sold leaves $24,000 gross profit; minus $19,000 of operating expenses, net profit is $5,000.
This is the report that tells you whether your advertising is a cost or an investment. With ad spend broken out on its own line against the revenue in the same period, the question stops being a feeling and becomes arithmetic.
Related terms
A balance sheet is a snapshot of what your business owns, what it owes, and what is left over for the owners on a specific date.
A cash flow statement tracks the actual money moving in and out of your business over a period, separate from profit on paper.
Cost of goods sold is the direct cost of delivering what you sold — materials, products, and the labor tied to the job itself.
Gross margin is the share of revenue left after the direct cost of delivering it, expressed as a percentage.
Want this metric run for you?
Karbon Agency runs Meta, SEO, and landing pages for local businesses — and shows you every metric, live.