The modern name for a profit and loss statement or P & L is an income statement. For tax purposes, it still is intended to just reflect whether a business gained money, lost money, or stayed the same. These forms are generated on a periodic basis. Most of the time they are produced monthly, quarterly, and annually. They can be produced to show multiple years or other various time divisions depending on purpose and need.

Since the content of an income statement can vary widely from business to business depending on how they operate and generate revenue, we will examine the generic form of the documents. For example, not all businesses sell goods, so the "cost of goods sold" will not be on all income statements. Also, not all businesses express revenue sources in the same manner. A church would have offerings, but an airline probably would not.

Income statements are generally divided into four pieces. The first piece encountered at the top is the balance forward from the previous period. This represents the money that the company had to begin business at the start of the current period. If the business is healthy, the overall balance forward should be a positive number. There may be times when an account dips into the negative column, but the overall position of the company is black.

In the second part of the statement is the income part of the income statement. All revenue sources will be listed here as well as any negative revenues. A negative revenue would like a refund to an unhappy customer. Again, these negatives would often be offset by positive income and not really be reflected as a negative on the composite report.

All revenues are added together to arrive at a total funds available. This number represents all of the cash available to the company for operations during the period. If all is well for the period, this should be the largest number on the report.

The third part of the income statement will contain the expenses for the period. This portion of the report will include such diverse items as payroll, interest payments, utilities, and insurance costs. Whatever the company spent money for during the period is listed here. Many times items are combined under a more general heading to conserve space. For example all shipping costs whether going out or coming in may simply be called "shipping."

The conclusion of this portion of the income statement will list the total expenses for the period represented. This number will frequently be the second largest number on the form. If it turns out to be the largest number, the income statement will have a loss.

The final piece of the income statement is the profit or loss information. Depending on the complexity of the company business and the income statement, this may require several lines. A gross profit or loss may be listed as the raw total of the income and expenses combined. Other items may be subtracted from this number. If a company pays stock dividends these would change the profit or loss in this area.

When everything has be adjusted, the final number at the bottom of the income statement will be the profit or loss the company had during the period. At times, a note or footnote will be included with an income statement to explain why certain things were included or excluded from a given income statement. The note or notes may also justify larger than expected profits or losses to owners or shareholders. The length of an income statement can range from less than a page to a document that resembles a book.

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