Understanding Profit & Loss Accounts



All businesses have to prepare a profit and loss (P&L) account as part of their annual accounts. However this calculation is also a valuable part of your monthly management accounts. A P&L account shows exactly what has happened in a business, in terms of income and expenditure, during a specified period.

This factsheet explains the profit and loss account, and details the key terms you need to understand. It also provides hints and tips, and guides you to sources of further information.