Profit and loss statement
The profit and loss statement can also be called the:
- income statement
- statement of profit or loss and other comprehensive income.
The profit and loss statement shows the corporation’s income (sometimes called revenue) and expenses and whether it made a profit or loss for the period.
The profit and loss statement shows activity over a period of time. It’s the ‘from one date to another’ financial statement. It is usually headed ‘for the year ended…’.
The profit and loss statement is different to the statement of cash flows. [link] The statement of cash flows shows when the money actually came into or left the corporation. The profit and loss statement shows when the corporation committed to spending money or when an order was received (rather than when it was paid).
Income and expenses are usually sorted into groups in the statement. The groups are added up to show ‘total income’ and ‘total expenses’.
Put simply, if the income is higher than the expenses, the corporation has made a profit. If the expenses are higher than the income, the corporation has made a loss.
The profit is sometimes called a ‘surplus’ in the profit and loss statement.
A not-for-profit (NFP) corporation is allowed to make a profit. Making a profit simply means that the corporation is bringing in more money than it spends.
An NFP is not allowed to distribute that profit to its members. The profit must go back into the corporation and be used towards the objectives of the corporation.
Most Aboriginal and Torres Strait Islander corporations are NFPs.
What you should be able to tell from the profit and loss statement
After looking at the profit and loss statement, you should know:
- what period of time the statement covers
- how much money is coming into the corporation and from whom.
- how much money the corporation is spending to deliver services or create products
- where the corporation is succeeding and where it might be struggling
- if there is additional cash to invest back into the corporation.
Example of a profit and loss statement
Below is a very simple example of a profit and loss statement that shows the corporation made a profit for the current year and a loss in the previous year.
The profit/loss figure in the bottom row is total income minus total expenses.
Brackets around numbers in financial statements mean the number is negative.
Current year | Previous year | |
$ | $ | |
| Income |
|
|
| Government grants | 200,000 | 50,000 |
| Donations | 25,000 | 20,000 |
| Fundraising | 150,000 | 15,000 |
| Total income | 375,000 | 85,000 |
|
| |
| Expenses |
|
|
| Bank loan repayments | 15,000 | - |
| Employee expenses | 160,000 | 100,000 |
| Lease of building | 45,000 | 20,000 |
| Computer equipment | 8,000 | - |
| Total expenses | 228,000 | 120,000 |
|
| |
| Profit/loss for the year | 147,000 | (35,000) |