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Profit and Loss Statement

Definition

An income statement or profit and loss account is one of the financial statements of a company and shows the company's revenues and expenses during a particular period. It indicates how the revenues are transformed into the net income. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.

A financial statement that sums up the expenses, costs and revenues that are incurred by an organization over a specific period of time is called the profit and loss statement. The ability of the company, to reduce costs or increase revenue through profits, or do both is provided by the profit and loss statement. It is also referred to as the income statement, the statement of profit and loss, the statement of financial results, the statement of operations, as well as, the income and expense statement.

More about Profit and Loss Statement

Profit and loss statement is one of the three financial statements that are issued by each public company over the period of a quarter, every year. The other two are the cash flow statement and the balance sheet. The income statement, which is another name for the profit and loss statement, is made to show the changes in accounts that take place over a specific period of time. On the other hand, a balance sheet will only tell you what are the assets and liabilities of the organization in a defined period. Comparing the cash flow statement and the income statement is necessary because under the accrual method of accounting, expenses and revenues need to be logged in the statements before cash changes hand actually.

There is a general form of income statement that is usually followed by all organizations. Beginning with the entry for revenue and subtracting from it the cost of doing the business (including the operating expenses, the cost of goods sold, interest expense and the tax expense). The bottom line, which gives the difference between the aforementioned values, is the net income of the organization which is also referred to as the earning or profits.

Comparing income statements from different accounting periods is important since it provides the account of any changes that have been taking place in the organization in terms of the operating cost, changes in the revenue, net earnings, and the cost of research and development.


Further Reading


General Regulatory Framework in Rastin Profit and Loss Sharing Banking (Part I-Operational Context)
www.ssbrj.org [PDF]
… Given the opportunity cost of liquid funds, the bank should make all profitable investment after having the … up their rights to a part of or their entire Mudarib share in profits in favor of … this guidance can motivate or encourage Islamic banks to be more participative in profit and loss …

Challenges of profit-and-loss sharing financing in Malaysian Islamic bankingChallenges of profit-and-loss sharing financing in Malaysian Islamic banking
ejournals.ukm.my [PDF]
… Given the opportunity cost of liquid funds, the bank should make all profitable investment after having the … up their rights to a part of or their entire Mudarib share in profits in favor of … this guidance can motivate or encourage Islamic banks to be more participative in profit and loss …

External equity financing in agriculture via profit and loss sharing contracts: a proposed financial innovationExternal equity financing in agriculture via profit and loss sharing contracts: a proposed financial innovation
onlinelibrary.wiley.com [PDF]
… Given the opportunity cost of liquid funds, the bank should make all profitable investment after having the … up their rights to a part of or their entire Mudarib share in profits in favor of … this guidance can motivate or encourage Islamic banks to be more participative in profit and loss …

Corporate financial statements, a product of the market and political processesCorporate financial statements, a product of the market and political processes
journals.sagepub.com [PDF]
… Given the opportunity cost of liquid funds, the bank should make all profitable investment after having the … up their rights to a part of or their entire Mudarib share in profits in favor of … this guidance can motivate or encourage Islamic banks to be more participative in profit and loss …

Predicting the near term profit and loss statement with an econometric model: A feasibility studyPredicting the near term profit and loss statement with an econometric model: A feasibility study
www.jstor.org [PDF]
… Given the opportunity cost of liquid funds, the bank should make all profitable investment after having the … up their rights to a part of or their entire Mudarib share in profits in favor of … this guidance can motivate or encourage Islamic banks to be more participative in profit and loss …

The entrepreneurial role of profit‐and‐loss sharing modes of finance: Theory and practiceThe entrepreneurial role of profit‐and‐loss sharing modes of finance: Theory and practice
www.emerald.com [PDF]
… Given the opportunity cost of liquid funds, the bank should make all profitable investment after having the … up their rights to a part of or their entire Mudarib share in profits in favor of … this guidance can motivate or encourage Islamic banks to be more participative in profit and loss …

Determination of profit and loss sharing ratios in interest-free business financeDetermination of profit and loss sharing ratios in interest-free business finance
papers.ssrn.com [PDF]
… Given the opportunity cost of liquid funds, the bank should make all profitable investment after having the … up their rights to a part of or their entire Mudarib share in profits in favor of … this guidance can motivate or encourage Islamic banks to be more participative in profit and loss …

General Regulatory Framework in Rastin Profit and Loss Sharing Banking (Part II-Legal Groundwork)General Regulatory Framework in Rastin Profit and Loss Sharing Banking (Part II-Legal Groundwork)
www.ssbrj.org [PDF]
… Given the opportunity cost of liquid funds, the bank should make all profitable investment after having the … up their rights to a part of or their entire Mudarib share in profits in favor of … this guidance can motivate or encourage Islamic banks to be more participative in profit and loss …



Q&A About Profit and Loss Statement


How do you compare different accounting periods with an income statement?

You compare different accounting periods with an income statement by comparing them to each other.

What is a profit and loss statement?

A financial statement that sums up the expenses, costs and revenues that are incurred by an organization over a specific period of time is called the profit and loss statement.

What does net income represent on an income statement?

Net Income represents the bottom line which gives the difference between revenue and cost of doing business (including operating expenses, cost of goods sold, interest expense and tax expense).

What does the income statement show?

The income statement shows changes in accounts over a specific period of time.

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