Profit and Loss Statement Sample

Financial statements present the well-being of a company in quantitative terms. When we talk of financial statements, we refer to the income statement (profit and loss statement), the balance sheet and the statement of cash flow. These are compiled on a quarterly as well as annual basis. The following write-up presents a profit and loss statement sample and discusses the components of the same.

Publicly traded companies are required to file quarterly and annual reports with the Securities and Exchange Commission (SEC) in accordance with the SEC mandate, that calls for full-disclosure, for protecting investors against fraudulent and manipulative practices in the securities markets. These reports are popularly known as the 10-Qs and the 10-Ks. The 10-Qs (quarterly reports) and the 10-Ks (annual reports) contain financial statements and other relevant information that may be useful to a cautious investor who is interested in knowing more about the financial well being of the company. The 10-Qs are not audited while the 10-Ks have to be audited. This is the same as saying that annual reports have to be prepared by a Certified Public Accountant who endorses that the financial statements have been prepared in accordance with the requirements of the US GAAP (Generally Accepted Accounting Principles).

Income Statement or the Profit and Loss Statement Sample

The profit and loss statement presents financial transactions on a quarterly or annual basis and depicts earnings, expenses and profits for the given fiscal year or quarter under consideration. It is also known as the earnings report or the income statement. The following profit and loss statement sample for the 1st quarter may help one understand the components of the income statement.

Quarterly Profit and Loss Statement Sample for the Quarter Ended 30th September '09 (In million of US dollars)

Period Ended	June 09
Sales	25
less Cost of Goods Sold	10
Gross Profit	15
less Operating Expenses	04
less Non-Cash Operating Expenses	05
Operating Profit	06
plus Non-Operating Income	0.01
less Non-Operating Expenses	01
Income Before Tax	5.01
Provision for Tax @ 35%	1.7535
Net Income after Tax	3.2565

Here
Sales: Sales is the revenue that is generated and is computed by multiplying the volume of goods sold by the price per unit of sales.

Cost of Goods Sold (COGS): COGS includes the cost of materials used in the creation/production of goods, capital costs as well as direct labor costs. However, this does not include indirect expenses, viz. distribution costs and sales force costs.

Operating Expenses: Expenses incurred in the normal course of business operation, viz. wages and salaries of employees, research and development costs that are not capitalized, legal fees, fees of accountants, bank charges, office supplies, business licenses, electricity bills, costs to maintain a stock market listing etc. are known as operating expenses. These expenses are also known as SG&A costs or selling, general and administrative costs.

Non-Cash Operating Expenses: These refer to depreciation, amortization and depletion. For more on depreciation and amortization one may refer to the article, 'difference between depreciation and amortization'.

Non-Operating Expenses: Non-operating expenses result from activities that are not a direct consequence of core business operations. The most common non-operating expense is interest that is due on borrowed sum. Pension contributions and expenses related to other employee benefits may also be classified as non-operating expenses. Costs incurred from restructuring or reorganizing, currency exchange, and expenses due to obsolescence of inventory are also categorized as non-operating expenses.

Non-Operating Income: Income from dividends, gains from investment and gains due to favorable foreign exchange rate do not pertain to core business operations, and are thus classified as non-operating income.

As mentioned earlier, the above profit and loss statement sample is for the first quarter. The same template can be used for the remaining 3 quarters. 10-Ks needs to be audited for publicly traded companies. Private companies are not required to file with the Securities and Exchange Commission (SEC).