Profit and loss account

A profit and loss account is a financial statement that summarizes the financial transactions for a business over a period in time. In reference to charitable organisations it is sometimes known as an Income and Expenditure account.

In the United Kingdom the regulation for partnerships, sole traders, charities and chartered institutes allows a degree of flexibility in the presentation of profit and loss accounts. However there is tight regulation over the presentation of limited companies, which is set out in the Companies Act 1989.

Example

A typical profit and loss account for a limited company may look similar to the one shown below.

Profit and Loss Account for the year ended date - month - year

Sales............................................................10,217,880 
Cost of sales.....................................................5,468,000
                                                                  _________ 
Gross profit......................................................4,749,880
Net Operating Expenses (see note 1)...............................2,333,605 
                                                                  __________
Profit on ordinary activities before taxation and interest........2,416,275 
Interest payable......................................................5,250 
                                                                  __________
Profit on ordinary activities before taxation.....................2,411,025
Taxation..........................................................1,080,000
                                                                  __________
Profit for the financial year.....................................1,331,025
Dividends Paid......................................................140,000
Dividends Proposed...................................................75,000
                                                                  __________
Retained Profit for the financial year............................1,116,025

Note 1 
Operating Expenses 
Depreciation................1,211,426 
Wages and NI..................908,110 
Administration expenses.......126,390 
Distribution Costs.............87,690 
                               _______ 
                            2,333,605