Profit and Loss account (P&L)

Depicts the annual performance of the business in terms of costs and revenues.

One of the three key business reporting and measuring instruments (the other two being the balance sheet and cash flow statement). The P&L attempts to depict the underlying performance of the business by recognising only those portions of total costs and revenues that relate to the reporting year under consideration. Short-term items (e.g. monthly payroll costs) will often be shown in their entirety, but longer-term items (e.g. investment in long life fixed assets) need to be allocated over many different accounting years to reflect their useful lives. In this respect, the P&L will appear radically different from a cash flow since it

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