A profit and loss sheet details your business transactions, subtracting the total outgoings from the total income to give you a reading of how much, if any, profit you have made.
A profit and loss sheet, unlike a balance sheet, displays the financial health of your company for a period of time – a month, a quarter or a year. A balance sheet only represents your finances at a particular moment in time.
If your company is incorporated, you are required by law to produce a profit and loss sheet for each financial year. If your business is not trading as a limited company you don’t have to produce one, but the information you give to HMRC to work out your tax bill will amount to the same thing anyway. Even if you’re not required to produce one, the P&L sheet is useful to show owners, investors and shareholders how your business is doing at a glance.
You can find an example of a basic P&L sheet below:
|Opening stock (1st of month)||3,000|
|Add purchase made||24,253|
|Less closing stock (30/31st of month)||4,278|
|Cost of goods sold||31,531|
|Direct labour costs||7,364|
|Rent and rates||3,294|
|Heat, light and power||783|
|Indirect wages and salaries||7,296|
|Printing, stationery and consumables||1,951|
|Depreciation of assets||3,697|
|Legal and professional fees||750|
|Bank and finance charges||264|
|Net Profit Before Tax||8,954|