The Profit and Loss Statement or P&L, as it is abbreviated, reports the business’s revenue, expenses, and resulting profit or loss.  The P&L along with the Balance Sheet, which will be described in a future post, are the two main financial statements of any small business.  There are others, but these two are critical in assessing your business’s success and related value.

Revenue Accounts

Revenue accounts can be documented by a number of different names, but whatever they are called they report the  income of the business.  Income is derived from the sale of services or goods and is documented by the invoicing of these services or goods.  In a company that utilizes the cash basis or method the revenue is recognized when cash is received.  One that utilizes the accrual basis or method will recognize it’s revenue when it is earned and invoiced. Revenue accounts can be further defined by the type of revenue.  A company that generates revenue from services and goods may, and maybe should, have separate revenue accounts for each.  Some companies may even further delineate their revenue into the different types of goods or services, and so on.  The level of differentiation is dependent on the informational reporting needs of the owner(s).

Expense Accounts