In This Chapter

We already know how much profit our make-believe company made when we finished the trial balance. We confirmed its accuracy when all the numbers balanced on the balance sheet.

Now it’s time to take a closer look at how we got to that profit. The profit and loss (P&L) statement takes you behind the scenes of the balance sheet to give you a more detailed view of your daily business operations. By developing and analyzing your company’s P&L statement, you will have a snapshot that can help you assess how well your company is doing and quickly find areas that need attention to improve your company’s profitability.

We show you how to develop the P&L statement and how to compare your statement to other similar businesses. We also discuss how to use your P&L statement for key business decision making and alternatives for formatting the P&L to meet your business needs.