Profit & Loss Statement
The Profit & Loss (P&L) statement, also called the income statement, reports the result of business operations for a period. In India sole proprietors and partnership firms usually prepare it in two parts: the Trading Account which arrives at gross profit, and the Profit & Loss Account which deducts indirect expenses and adds other incomes to arrive at net profit.
Formulas
- Cost of Goods Sold (COGS) = Opening Stock + Purchases (net of returns) + Direct Expenses − Closing Stock
- Gross Profit = Net Sales − COGS
- Net Profit = Gross Profit + Other Incomes − Indirect Expenses
- Gross margin % = Gross Profit ÷ Net Sales × 100; Net margin % = Net Profit ÷ Net Sales × 100
How this tool works
Enter your business name and period, opening and closing stock, then fill four small tables: sales lines, direct expenses, other incomes and indirect expenses. Returns can be entered as negative amounts. The statement preview updates live in a printable A4 format, with summary cards for gross profit, net profit and margins and a chart of cost structure. Download it as PDF or Excel. Entries are saved in your browser.
Worked example
Sales ₹24,00,000 less returns ₹40,000 → net sales ₹23,60,000. Opening stock ₹1,50,000, purchases ₹15,00,000 less returns ₹25,000, carriage ₹35,000, wages ₹1,20,000, closing stock ₹1,80,000 → COGS ₹16,00,000 and gross profit ₹7,60,000 (32.2%). Other income ₹20,000; indirect expenses (salaries ₹2,40,000, rent ₹96,000, utilities ₹28,000, depreciation ₹45,000, misc ₹15,000, interest ₹22,000) = ₹4,46,000. Net profit = ₹3,34,000 (14.2% of sales).
Common adjustments
Before finalising, adjust for outstanding expenses (add to the expense), prepaid expenses (deduct), accrued income (add), depreciation on fixed assets, bad debts and provision for doubtful debts. Each adjustment affects both the P&L and the Balance Sheet.
Direct vs indirect expenses
Direct expenses are incurred to bring goods to saleable condition (freight inward, wages, power for production, customs duty). Indirect expenses relate to administration, selling and finance (salaries, rent, advertising, interest, depreciation).
Frequently Asked Questions
What is the difference between gross profit and net profit?
Gross profit is sales minus the cost of goods sold. Net profit further deducts all indirect/operating expenses and adds non-operating incomes.
Where do I enter sales returns?
Add a line such as "Less: Sales Returns" with a negative amount in the Sales section.
Is depreciation a direct or indirect expense?
For most trading businesses it is indirect and appears in the P&L Account. Depreciation on factory machinery may be treated as a manufacturing (direct) cost.
Can I use this for ITR filing?
It gives the figures needed for the P&L schedule of ITR-3/ITR-4 for small businesses, but consult your CA for tax adjustments and audit requirements.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.