To know how a company is performing, it is essential to draw up a periodic statement of income and expenses.
A company aims to produce goods and services and to sell these for the largest possible profit. During manufacture and sale, these goods and services generate expenses and income. These are recorded in the profit and loss statement in order to calculate the result.
The figures in a profit and loss statement are always for a specific period. An annual breakdown is essential. A six-monthly, quarterly or even monthly breakdown is also helpful so that the company can quickly check if it is operating in line with its budget or if corrections are necessary.
Running a company requires a workforce, assets (production tools, etc.) and the use of external providers. This includes salary payments, consumption of materials, wear and tear on facilities, and rent payments, among others. In accounting terms, this depreciation is posted as an expense. By selling goods and services, a gain—which is known as revenue—can also be generated.
Profit and loss statement: Expenses and revenue
Profit and loss statement as of 12/31/2010