The Profit and Loss statement (P&L), also called the Income Statement, measures your company's financial performance over a specific period. It shows revenue earned, expenses incurred, and resulting p...
Last updated Jul 22, 2026 · 5 min read
The P&L organizes accounts into sections:
Revenue (sales):
Total revenue shows your top-line financial performance.
Cost of goods sold (COGS): Direct costs to produce goods or deliver services:
Gross profit = Revenue - COGS. Shows profitability before operating expenses.
Operating expenses: Costs to run the business:
Operating income = Gross Profit - Operating Expenses. Shows profit from core business operations.
Other income/expenses: Non-operating items:
Profit before tax = Operating Income + Other Items.
Tax expense: Income taxes owed.
Net profit = Profit Before Tax - Tax Expense. Bottom-line profitability.
Generate your P&L statement:
Light displays the P&L formatted by revenue, expense, and profit categories.
Revenue accounts: Represent sales of products and services. Show before returns and discounts.
Discount and returns accounts: Reduce gross revenue to net revenue (revenue after typical reductions).
Cost of goods sold: Direct costs that vary with production or service delivery. Excludes overhead and administrative costs.
Gross margin = Gross Profit ÷ Revenue. Percentage of revenue remaining after direct costs. High margins indicate pricing power or efficient operations.
Operating expenses: Fixed and variable costs to operate the business. Include all support functions.
EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization.
A metric showing operating profitability before financing and tax impacts (calculated as Operating Income + Depreciation + Amortization).
Interest expense: Cost of borrowed money. Shows on P&L when debt is outstanding.
Tax expense: Income taxes owed based on taxable income. Includes current and deferred tax.
Good to know: Some companies show tax as a percentage (effective tax rate) as well as absolute amount for stakeholder understanding.
Key performance indicators derived from the P&L:
Gross margin % = Gross Profit ÷ Revenue
Shows profitability on each sale before operating expenses.
Operating margin % = Operating Income ÷ Revenue
Shows profitability from core business operations.
Net margin % = Net Income ÷ Revenue
Shows bottom-line profitability. Industry-specific benchmarks exist.
Operating leverage: How much expenses increase relative to revenue growth.
In custom table reports, you can add ratio lines using the PERCENT formula, which divides one set of report lines by another. See Custom reports and filters.
Revenue appears on the P&L in the period it's recognized, which may differ from cash receipt:
The P&L reflects economic reality (when you earned the revenue) rather than cash timing.
Expenses appear on the P&L in the period incurred, which may differ from cash payment:
This matching principle ensures P&L reflects the cost of earning revenue in each period.
Compare P&L to prior periods:
This identifies profit drivers and problem areas.
For organizations with multiple entities:
Light automatically eliminates inter-company transactions in consolidated reporting.
Report P&L in different currencies:
For multinational companies:
Analyze P&L by business segment:
This supports strategic planning and resource allocation.
Analyze expenses by cost center:
Light tracks cost center on every transaction, enabling detailed analysis.
Budget comparison is done on the page rather than in ledger reports:
See Budget scenarios for details. Investigate variances >10% to understand performance drivers.
View cumulative P&L from year start:
Compare YTD performance to budget or prior year for mid-year assessment.
Light does not generate P&L projections. To maintain a forecast:
You can maintain multiple scenarios simultaneously — for example a base plan and a stress-tested downside case. Use for planning and to communicate with lenders or investors. See Budget scenarios.
Comprehensive P&L reporting includes footnotes:
Prepare footnotes outside Light as part of your financial statement package, using exported report data to support the underlying schedules.
Tip: Separate discontinued operations and one-time items from continuing operations for clearer performance analysis.
Export P&L for external distribution or analysis:
You can open the CSV in Excel or Google Sheets for further formatting and distribution. Drilldown transaction lines can also be exported as CSV.
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