Profit and Loss Account

The total of income less expenses, excluding the components of other comprehensive income.

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The profit and loss account, also known as the income statement, is a financial statement that summarises a company's revenues, expenses, and profit over a specific period. It is typically divided into sections showing gross profit (sales minus cost of goods sold), operating profit (gross profit minus operating expenses), and net profit (operating profit minus interest and taxes).

Example/Scenario: A tech start-up focusing on software development may use a profit and loss account to showcase its financial performance to investors. The revenue section includes software sales and subscription fees, while the expenses section lists costs like salaries, office rent, and research and development. If the company had £1.2 million in revenue and £1 million in total expenses, the profit and loss account would reveal a £200,000 profit, indicating the company's profitability.