Bookkeeping · 7 min read
P&L Statement Explained for Small Business Owners
Your Profit & Loss (P&L) — also called an income statement — tells you whether the business actually made money. If you can read it, you can run the business.
The five sections of a P&L
- Revenue — everything you earned (not what you collected)
- Cost of Goods Sold (COGS) — direct costs to deliver the sale
- Gross Profit — Revenue minus COGS
- Operating Expenses — rent, payroll, software, marketing
- Net Income — what's left after every expense
The numbers owners should watch
- Gross margin % = Gross Profit ÷ Revenue
- Operating margin % = Operating Income ÷ Revenue
- Net margin % = Net Income ÷ Revenue
- Trend: each line month-over-month and vs. last year
