Hint – An Income Statement is also known as a “Profit and Loss” or P&L report.
A Profit and Loss account shows what happened in a business, in terms of income, sales and expenditure, during a specific period. All quoted companies and all mid and large size registered businesses in the UK have to prepare a Profit and Loss account as part of their annual accounts. By drawing up a Profit and Loss Account, it is possible to see whether any action is needed to maximise profit.
The Profit and Loss Account shows:
• The turnover or sales for the period.
• The expenditure for the period.
• The level of profit.
• How that profit has been divided.