Profit & Loss Statement

The Profit & Loss (P&L) statement, also called Income Statement, shows your business's financial performance over a period by comparing revenue against expenses.

What is a P&L Statement?

Shows:

• Revenue - Money earned from sales
• Cost of Goods Sold (COGS) - Direct costs of products/services sold
• Gross Profit - Revenue minus COGS
• Operating Expenses - Business running costs
• Net Profit/Loss - Final profit or loss

Formula:

Revenue
- Cost of Goods Sold
= Gross Profit
- Operating Expenses
= Net Profit/Loss

[SCREENSHOT: Sample P&L statement]

Generating P&L Report

1. Navigate to https://accounting.digit-tally.io
2. Click Reports > Profit & Loss
3. Select date range (e.g., "This Month", "This Year")
4. Click Generate Report

[SCREENSHOT: Generate P&L dialog]

P&L Components

Revenue Section

Includes:

• Sales revenue (from invoices)
• Service income
• Other income

Example:

Revenue
  Sales Revenue          NGN 5,000,000
  Service Income         NGN 1,500,000
  Other Income             NGN 100,000
                        -----------
Total Revenue           NGN 6,600,000

Cost of Goods Sold

Includes:

• Purchase of goods for resale
• Raw materials
• Direct labor
• Manufacturing costs

Example:

Cost of Goods Sold
  Purchases              NGN 3,000,000
  Direct Labor             NGN 500,000
                        -----------
Total COGS              NGN 3,500,000

Gross Profit:

Gross Profit = Revenue - COGS
             = NGN 6,600,000 - NGN 3,500,000
             = NGN 3,100,000

Operating Expenses

Includes:

• Salaries and wages
• Rent
• Utilities
• Marketing
• Office supplies
• Professional fees
• Depreciation
• Bank charges

Example:

Operating Expenses
  Salaries              NGN 1,200,000
  Rent                    NGN 300,000
  Utilities               NGN 150,000
  Marketing               NGN 200,000
  Other Expenses          NGN 250,000
                        -----------
Total Operating Exp     NGN 2,100,000

Net Profit:

Net Profit = Gross Profit - Operating Expenses
           = NGN 3,100,000 - NGN 2,100,000
           = NGN 1,000,000

[SCREENSHOT: Complete P&L with all sections]

P&L Analysis

Key Metrics

Gross Profit Margin:

Gross Profit Margin = (Gross Profit / Revenue) × 100
                    = (NGN 3,100,000 / NGN 6,600,000) × 100
                    = 47%

Net Profit Margin:

Net Profit Margin = (Net Profit / Revenue) × 100
                  = (NGN 1,000,000 / NGN 6,600,000) × 100
                  = 15%

[SCREENSHOT: P&L with margin calculations]

Comparative Analysis

Month-over-Month:

• Compare current month vs previous month
• Identify trends
• Track growth

Year-over-Year:

• Compare same month previous year
• Seasonal analysis
• Annual growth rate

[SCREENSHOT: Comparative P&L report]

Using P&L for Decisions

What to Look For

Healthy Business:

• ✅ Consistent revenue growth
• ✅ Stable or improving margins
• ✅ Controlled expenses
• ✅ Positive net profit

Warning Signs:

• ⚠️ Declining revenue
• ⚠️ Shrinking margins
• ⚠️ Rising expenses faster than revenue
• ⚠️ Consistent losses

Action Items

If Profit is Low:

1. Review pricing strategy
2. Reduce unnecessary expenses
3. Improve collection from customers
4. Increase sales volume
5. Negotiate better supplier prices

If Expenses are High:

1. Categorize and analyze each expense
2. Identify non-essential spending
3. Negotiate better rates (rent, services)
4. Automate processes to reduce labor
5. Review and cancel unused subscriptions

Exporting P&L

Export Options:

• PDF for sharing with stakeholders
• Excel for detailed analysis
• Email directly to accountant

Uses:

• Tax return preparation
• Loan applications
• Investor presentations
• Board meetings
• Management reviews

[SCREENSHOT: Export P&L options]

What's Next?

• Balance Sheet - Understand your financial position
• Cash Flow Statement - Track cash movements
• Accounting Overview - More accounting features

Monthly Review

Generate your P&L statement monthly to stay on top of your business's financial performance. Compare with budget and take corrective actions early.