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Calculate your profit and loss – bring it all together

In this article we will take a look at what a profit and loss statement is and how to calculate it for your online business.
Image of graphs in a blender
© RMIT University 2017
So far, you have learnt that the income statement is also referred to as a profit and loss (P&L) report and that it reports the financial performance for a business for a specific period.
The statement consists of four components: income, cost of goods sold, expenses and the profit or loss. Business owners can use this statement to compare and monitor performance.
Case Study
You followed Paul as he has worked through the past three steps to construct his income statement. He identified his Income, cost of goods sold and business expenses and has now completed his income statement, as shown below.
Paul's Income Statement
When reading Paul’s statement, there is a calculation:
P&L Equation
In Paul’s case he has made a profit of $2,140 for the three months to 30 September.
Discussion
Discuss with other learners the nature and purpose of the ‘income statement’’ and how it can be used to monitor business performance.
Take a look at the articles in the See Also section below for additional information about income statements.
Do you think that Paul has made a reasonable profit for the three months?
Justify your answer in the Comments area.

© RMIT University 2017
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