A profit and loss statement indicates the income and the cash outflow of the company. This helps creditors and investors to determine the financial performance of the company. An income statement should indicate both the revenues and the expenses of the company. Both of which should come from the same given period of time.
Revenues are considered as the amount of money obtained or increase in the value of assets of a company during its operations. This could be cash incomes from producing goods, rendering services or doing other activities related to the business' operations.
Expenses are considered as financial charges and acquisition of liabilities during the company's ongoing operations. This also include the charges cost by producing the goods and rendering services. The expenses should include the Costs of Good Sold; this is the direct cost attributed to the production of the goods. It includes the cost of materials and labor. Selling, General and Administrative expenses should also be taken into account.
This represents the expenses which are not related to production cost. This includes expenses incurred for advertisements, shipping, salaries of sales people, office rents, office supplies, etc. Expenses used for research and development should also be accounted for.
Aside from the expenses on the production and sales of the goods, depreciation and amortization of assets as well as the taxes charged by the state are also credited.
A profit and loss statement template should be systematic and complete. It should organize revenues according to the time the revenues were obtained and also as to how they were obtained. All kinds of expenses should also be taken into account and organized according to their nature.