Key takeaways
- A P&L covers a period of time. A balance sheet is a snapshot of one day.
- Main sections: revenue, cost of goods sold, gross profit, operating expenses, operating income and net income.
- For sole proprietors, Schedule C works like a tax-version P&L. See About Schedule C.
- Lenders, landlords and tax preparers often ask for a P&L, even from very small businesses.
What is a P&L?
A P&L is a one-page story of a period: here’s what came in, here’s what it cost, here’s what was left. Big companies call it an income statement. Small business owners often build one in a spreadsheet or accounting app from their sales records and expense receipts.
It’s the report you’ll reach for when applying for a loan, renting a commercial space, checking whether a price increase worked or preparing your taxes. Comparing this month’s P&L with the same month last year is one of the quickest ways to spot a problem, such as a cost category that’s quietly doubled or margins that have slipped.
Get the expense data your P&L needs, sorted by category, with the Manage Receipt app.
Sections
- RevenueSales and service income, less returns and discounts.
- Cost of goods soldDirect cost of products sold. Gross profit = revenue − COGS.
- Operating expensesRent, software, marketing, wages, depreciation and other running costs.
- Operating incomeGross profit minus operating expenses.
- Other items and net incomeInterest, one-off gains or losses, then the bottom line.
Sample P&L
An online home-goods shop, January 1 to December 31, 2026:
| Line | Amount |
|---|---|
| Gross sales | $62,000 |
| Less returns | ($1,200) |
| Net sales | $60,800 |
| Cost of goods sold | ($24,300) |
| Gross profit | $36,500 |
| Studio rent | ($7,200) |
| Advertising | ($4,200) |
| Shipping to customers | ($3,100) |
| Software and subscriptions | ($1,380) |
| Phone and internet | ($1,320) |
| Depreciation | ($1,200) |
| Other expenses | ($800) |
| Total operating expenses | ($19,200) |
| Operating income | $17,300 |
| Interest expense | ($300) |
| Net income | $17,000 |
Gross margin is $36,500 ÷ $60,800 = 60.0%. Net margin is $17,000 ÷ $60,800 = 28.0%.
How expenses appear
Every expense receipt follows the same path into the P&L:
- You capture the receipt and record the amount, date and vendor.
- You assign it an expense category, such as advertising or software.
- Category totals for the period become the expense lines on the P&L.
- Inventory and materials go to COGS; long-lasting purchases go to the balance sheet and appear only as depreciation.
Missing or miscategorized receipts show up directly as wrong totals. A meal filed under supplies, or a $3,000 laptop filed as office expense, changes what the P&L says about your business.
P&L vs balance sheet
| P&L | Balance sheet | |
|---|---|---|
| Time frame | A period (month, quarter, year) | A single date |
| Shows | Revenue, expenses, profit or loss | Assets, liabilities, owner’s equity |
| Answers | Did we make money? | What do we own and owe? |
| Link | Net income feeds into equity | Equity grows with retained profit |
The expense half of your P&L, ready to go
Manage Receipt categorizes every scanned or emailed receipt and totals spending by category for any date range. Export that report and you have the operating expense section of your P&L, with each receipt attached if a lender or tax preparer asks to see the details.
Explore AI Expense ReportsFrequently asked questions
How do I make a P&L?
Pick a period, then total your revenue for it. Subtract cost of goods sold to get gross profit. List operating expenses by category from your receipts and subtract them to get operating income. Subtract interest and other items for net income. A spreadsheet works fine for a small business.
What is the difference between a P&L and a balance sheet?
A P&L shows revenue, expenses and profit over a period of time, like a year. A balance sheet shows what the business owns and owes on a single date. Net income from the P&L flows into owner’s equity on the balance sheet, which links the two reports.
Is a P&L the same as an income statement?
Yes. Profit and loss statement, P&L, income statement and statement of operations all describe the same report: revenue minus costs and expenses over a period, ending in net income or net loss. Small businesses tend to say P&L; larger companies say income statement.
How often should I run a P&L?
Monthly is ideal for most small businesses, because it catches rising costs and slow months early. At minimum, run one quarterly to support estimated tax payments and one for the full year at tax time. Lenders usually want the most recent year plus year-to-date.