What Is a Profit and Loss Statement? Simple Guide

TL;DR: A profit and loss statement (P&L) shows how much money your business made, or lost over a period of time. It’s like a financial selfie that helps you see what’s working, what’s not, and what’s really going on behind the scenes.

Your business isn’t just a passion project, it’s supposed to pay you…

But if you’ve ever looked at your bank account and thought, “Wait… where did all the money go?”, it’s time to introduce yourself to the profit and loss statement (aka P&L).

This one report can show you:

• How much you’re earning

• What you’re spending

• And whether you’re actually making a profit or just working hard to break even

The best part? You don’t need an MBA or a spreadsheet obsession to use it.

What Is a Profit and Loss Statement?

A profit and loss statement (sometimes called an income statement) is a summary of your business's income and expenses over a specific time period: usually monthly, quarterly, or yearly.

It tells you:

• How much money came in (revenue)

• How much went out (expenses)
  What’s left over (net profit or loss)

Think of it as your business’s report card. If your goal is to run a smooth, scalable, and profitable operation, you’ll want to keep an eye on this one regularly.

P&L in Plain English: The Lemonade Stand Test

Imagine you run a lemonade stand:

• You make $100 from selling lemonade (that’s revenue)

• You spend $30 on lemons, sugar, and cups (expenses)

• You walk away with $70 (that’s your profit)

Congratulations, you just created a mini profit and loss statement.

Now apply that to your business, whether you're a coach, consultant, designer, or freelancer and you’ve got a powerful tool for smarter decisions.

What’s Included in a Profit and Loss Statement?

A standard P&L includes a few key sections:

Revenue

All the money your business earns: from client work, product sales, digital courses, or passive income.

Cost of Goods Sold (COGS)

What it costs to deliver your product or service. This could be contractors, materials, software, or tools that are directly tied to your work.

Gross Profit

Revenue minus COGS. This tells you how much you made before operating costs kick in.

Operating Expenses

Everything it takes to run your business. Think subscriptions, software, marketing, rent, internet, etc.

Net Profit (or Loss)

What’s left after everything is paid. This is the number that tells you if your business is thriving, surviving, or burning out.

Why Every Solopreneur Needs a P&L (Yes, Even You)

Here’s the truth: You can’t fix what you don’t track.

A profit and loss statement helps you:

• See what’s actually making money

• Spot unnecessary expenses

• Make informed pricing decisions

• Feel confident about paying yourself

• Prep for taxes without panic

Even if you’re a one-person show, this one report can change how you see (and grow) your business.

“Okay… but how do I get one?”

Glad you asked.

You can:

• Use a free profit and loss template

• Try accounting software like Xero or QuickBooks (though they can be overkill)

• Or… let Cashflowy do it automagically for you! No spreadsheets, nor headaches

With Cashflowy, your P&L updates in real time so you always know where you stand, no math headaches included.

When Should I Check My P&L?

We recommend checking it monthly, just like you’d check in with your business goals or your favorite client.

Look for:

• Revenue trends (Is income growing?)

• Expense patterns (Anything unnecessary?)

• Profit margins (Are you charging enough?)

• Opportunities to save, cut, or invest

This regular check-in helps you stay aligned, stay profitable, and stay out of financial guesswork.

What Your P&L Can Reveal (That Your Bank Account Won’t)

The Bottom Line

If you want to run a business that pays you well and grows sustainably, your profit and loss statement is your secret weapon. It’s not just about being “good with money”, it’s about knowing where your business stands, and what to do next.

Let Cashflowy Handle It For You

Cashflowy automates your bookkeeping and gives you a crystal-clear P&L in minutes. No spreadsheets. No stress. Just real insights that help you grow.

Want to see your profit in real time without lifting a finger?
Try Cashflowy for free today and start flowing toward smarter, more profitable decisions.