The Profit and Loss Account
The Profit and Loss statement gives us the film of the changes in the internal equity. The film tells you what happened to the internal equity over the previous period, if a profit or loss has been made over the previous period. If the company makes a profit, the internal equity increases. If the company made a loss, the internal equity decreases.
The P&L not only shows you if a profit or loss has been made, you can find details on how the result was created. How much was sold? Which salaries were paid? How much were the financial costs? Were there exceptional results?
20 minutes
This lesson will take you approximately 20 minutes to work through, that is, if you just follow the explanations.
70 minutes
With additional reading this lesson should take you in total about 70 minutes to complete.
4 hours
With additional reading and a review of the academic articles, journal articles or advanced concepts should take you closer to 4 hours to complete.
We start with a definition of the Profit and Loss statement, also known as the P&L, and continue with an overview over this account. We will discuss different kinds of costs and explain why not every ‘cost’ is treated in the same way. We conclude by giving an overview of the different kinds of result and list the most important ratios connected with the P&L.