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Profit and Loss › P&L format
Profit and loss account format, with an example
What goes under each heading of the statement of profit and loss, and a year worked out for a small trading shop.
The format, top to bottom
The statement of profit and loss in Schedule III to the Companies Act, 2013 (Division I) is a single column read from top to bottom: income first, then expenses by nature, then profit. Since accounting periods beginning on or after 1 April 2024, ICAI's Guidance Note on Financial Statements of Non-Corporate Entities asks proprietorships, partnership firms and similar businesses to use nearly the same headings, so one format serves a shop, a firm and a small company. Check with your CA which applies to you.
| Heading | What goes in it |
|---|---|
| Revenue from operations | Sales of goods and services, less sales returns. GST collected is not revenue: it is owed to the government. |
| Other income | Interest received, rent received, discount received, profit on selling an old asset. |
| Cost of materials consumed | For a manufacturer: raw material used (opening + purchases − closing raw material). |
| Purchases of stock-in-trade | For a trader: goods bought to sell, less purchase returns, without GST you can claim as input credit. |
| Changes in inventories | Opening stock less closing stock. A negative figure (stock went up) reduces the expenses. |
| Employee benefits expense | Salary, wages, bonus, your share of PF and ESI, staff welfare. |
| Finance costs | Interest on loans and overdraft. The principal part of an EMI is not an expense: it reduces the loan. |
| Depreciation and amortisation expense | The part of fixed assets (furniture, machines, vehicles, computers) used up in the year. |
| Other expenses | Rent, electricity, freight, repairs, telephone, bank charges, advertising, professional fees and the rest. |
| Tax expense | Income tax of a firm or company. A proprietor's own income tax is not a business expense: it is shown as drawings. |
Worked example: a trading shop, 1 April 2025 to 31 March 2026
| Particulars | Amount (₹) |
|---|---|
| Revenue from operations (sales 12,00,000 less returns 20,000) | 11,80,000 |
| Other income (interest received) | 5,000 |
| Total income | 11,85,000 |
| Purchases of stock-in-trade (9,00,000 less returns 10,000) | 8,90,000 |
| Changes in inventories (opening 1,50,000 less closing 1,80,000) | −30,000 |
| Employee benefits expense (salary) | 96,000 |
| Finance costs (interest on bank loan) | 12,000 |
| Depreciation (furniture) | 15,000 |
| Other expenses (rent 60,000, electricity 18,000, bank charges 2,000, miscellaneous 7,000) | 87,000 |
| Total expenses | 10,70,000 |
| Profit for the year | 1,15,000 |
Gross profit is sales less the cost of the goods sold: 11,80,000 − (8,90,000 − 30,000) = 3,20,000, a gross margin of about 27%. The net profit of 1,15,000 is what is left after every other expense, and it goes to the owner's capital in the balance sheet.