Understanding accounting: profit and loss statement (P&L)

Next to the balance sheet The income statement (P&L) is an important report within a company's financial statements. In this report, income and expenses are kept side by side. If there is a higher value on the earnings side, your company is in the profit zone. If it's the other way around, you make losses with your company.

The profit and loss account is mandatory

Whoever is considered a merchant by law and is subject to the obligation to accounting is subject to, must prepare a profit and loss account (P&L). This includes individual entrepreneurs, partnerships and corporations. Small traders and non-merchants are also obliged to create a profit and loss statement as soon as they make a profit of more than EUR 50,000.00 or a turnover of more than EUR 500,000.00.

Sole proprietors and partnerships are subject to relaxed structuring regulations.

Versino Financial Suite for SAP Business One Finance

The form of the income statement

The income statement is usually created for the past financial year or for a period of at least twelve months. If you want to deviate from this rule, you have to justify it. The income statement is part of the balance sheet.

In Germany, the profit and loss account is usually in the form of an account or scale. Once the form of presentation has been selected, it must be maintained in the following years. This is necessary to ensure that the figures can be compared.

If you apply the account form, you use the income statement as a closing account. Expenses are booked in the debit. Income comes into play. If the graduated form is used, the turnover of the previous year is used as a basis. The expenses are deducted from this in turn. The income is added. It is fundamental that only expenses and income from the same financial year are used. The structuring rules for sole proprietors and partnerships are handled more loosely.

The P&L in SAP Business One

That SAP Business One finance keeps templates for the income statement. You can define which period you want to look at: per month, per year or per period. The calculation can be based on different dates: due date, posting date or document date. On the level of detail is selectable, as well as an additional foreign currency.

SAP B1 blog