A profit and loss statement, also called an income statement, lists a business's income and expenses for a period, such as a month, quarter or year, and shows the difference as net profit or loss. For example, $8,000 of income minus $5,200 of expenses is a $2,800 profit, a 35% margin. For a sole proprietor, IRS Schedule C (Form 1040) is titled Profit or Loss from Business. A ProfitDrawer bookkeeping spreadsheet builds one for every month.
A simple monthly profit and loss statement:
| Line | Amount |
|---|---|
| Income (sales, services) | $8,000 |
| Supplies | $1,900 |
| Vehicle and fuel | $1,100 |
| Advertising, software, insurance and other | $2,200 |
| Total expenses | $5,200 |
| Net profit | $2,800 |
Points to know:
- Owner draws are not expenses. Money you take out for yourself does not lower the profit of a sole proprietorship.
- Under the cash method, income counts when you receive it; under an accrual method, generally when you earn it.
- For a sole proprietor, the yearly version is the starting point for Schedule C.
- Compare months side by side to spot falling sales or rising costs early.
A profit and loss statement shows performance over time. A balance sheet is a different report: a snapshot of what the business owns and owes on one date.
General information, not tax advice.
Source: About Schedule C (Form 1040), Profit or Loss from Business (IRS) · Updated
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General information, not tax, legal or financial advice. Check the rules for your state and your situation.