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:

  £   £
Sales/Turnover     60,894
Opening stock (1st of month) 3,000    
Add purchase made 24,253    
    27,253  
Less closing stock (30/31st of month)   4,278  
Cost of goods sold   31,531  
Direct labour costs   7,364  
      38,895
Gross Profits     29,363
Overheads      
Rent and rates   3,294  
Heat, light and power   783  
Insurance   106  
Indirect wages and salaries   7,296  
Marketing costs   571  
Printing, stationery and consumables   1,951  
Computer costs   758  
Telephone   939  
Depreciation of assets   3,697  
Legal and professional fees   750  
Bank and finance charges   264  
      20,409
       
Net Profit Before Tax     8,954