The Profit and the Loss Account


The Profit & Loss statement gives is 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 get 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, more like, 4 hours to complete.

We start with a definition of the Profit & 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 the same way. We conclude by giving an overview of the different kinds of result, and list the most important ratio’s connected with the P&L.