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Statement of Profit and Loss Template

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Most business owners are intimately familiar with the Profit and Loss statement, but what you may not know is that there's a specific format for it if you're filing your taxes as a self-employed individual. Here's a statement of profit and loss template designed to help make sure you're including all the info the IRS wants to see. Of course, it's always best to consult with an accountant when preparing your taxes, but this should at least give you a head start.


So, you want to know how to make a profit and loss statement? And maybe even understand it a bit? You've come to the right place. While there's no one-size-fits-all answer to this question, we're going to walk you through everything you need to know about creating your own profit and loss statement – from understanding what it is, all the way up to calculate your business profit. Plus, we'll give you a handy template that you can use as a starting point to calculate profit and everything else.


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Profit and loss statements (income statements) are essential financial reports for any business owner or entrepreneur. They show whether your organization is making money or losing money over a specific period of time. There are different types of profit and loss statements, but in this article we'll focus on the simple profit and loss statement – which is suitable for businesses that have little or no business income other than their profits (or losses).

The sole proprietor income statement is also relevant for small business owners who are not incorporated. This type of profit and loss statement shows your personal net income and business expenses related to running your business.

Finally, we'll provide instructions on how to create a Profit and Loss Statement, which will be especially useful if you're not comfortable with using spreadsheet formulas. Let's get started!

What is a profit & loss statement?

A Profit and Loss (income) statement is a financial statement that summarizes the revenue, costs, and expenses incurred during a specific period of time, usually a month or quarter. The profit and loss statement is also sometimes referred to as an "income statement" or a "statement of operations."

The main purpose of a profit and loss statement is to help business owners and managers track the company's financial performance over time and make informed decisions about where to allocate resources. The profit and loss statement can also be used by lenders and investors to assess a company's financial health.

There are several different formats for profit and loss statements, but the most common is the single-step format, which simply lists all business revenue and expenses in one place. The multi-step income statement format breaks down business revenues and expenses into categories, making it easier to see where the company is making and losing money.
  • Schedule C
    If you're self-employed, you'll need to file a Schedule C with your tax return. This is where you'll report your business revenue and expenses, using your income statement template Google Sheets.
  • Cash vs Accrual Method
    There are two main ways to prepare a Schedule C: using the accrual method or the cash method. Under the accrual method, you report income when it's earned, even if you haven't yet received payment. Under the cash method, you report income when you receive payment.

    Most small businesses use the cash method, because it's simpler and easier to track. However, there are some exceptions, so be sure to check with your accountant to see which method is best for your business.

Kinds of Profit and Loss Statements

There are three primary types of profit and loss statements: the simple profit and loss, the self-employed profit and loss, and the small business profit and loss.
  • Simple
    The simple profit and loss is the most basic type of statement and is typically used by businesses with a very small number of employees. This type of statement includes income from all sources, as well as expenses related to the operation of the business.
  • Self-Employed
    The self-employed profit and loss is similar to the simple profit and loss, but includes additional deductions for things like home office expenses and health insurance premiums. This type of statement is typically used by sole proprietorships and partnerships.
  • Small business
    The small business profit and loss is the most comprehensive type of statement and includes detailed information on business revenue, costs, expenses, and profits. This type of statement is typically used by businesses with more than a few employees.

Elements of a Profit and Loss Statement

The first step in creating a profit and loss statement is to gather all of the information you'll need. This includes your income statements, expense reports, and balance sheets. Once you have all of the necessary information, you can begin entering it into your statement of profit and loss template.

There are a few key elements that every profit and loss statement should include:
  • 1
    Revenue
    This is the total amount of money that your business has generated from sales or other sources of income.
  • 2
    Cost of goods sold
    This is the direct cost of the goods or services that you have sold. This includes the cost of materials, labor, and shipping.
  • 3
    Gross profit
    This is the difference between your revenue and your cost of goods sold. This is also sometimes referred to as your "gross margin."

  • 4
    Operating expenses
    These are the costs associated with running your business, such as rent, utilities, advertising, and wages.
  • 5
    Tentative profit and loss amount
    This is the difference between your gross profit and your business expenses. This is a preliminary number that can help you determine whether or not your business is profitable.
  • 6
    Expenses for business use of home
    If you operate your business out of your home, you may be able to deduct a portion of your rent or mortgage payments, as well as your utilities and other expenses.
  • 7
    Net profit
    This is the final profit or loss figure for your business. This number is arrived at after all deductions have been made.

How to create a Google Sheets Profit and Loss Statement?

Calculate Gross Income

The first step in creating your income statement template Google Sheets is to calculate your gross income. This is the total amount of money that your business has earned from sales or other sources of income. To calculate your gross income, simply add up all of your income streams. Or, take a look at your Google Sheets Annual Budget, if you have one. 
Revenue
Your revenue is the total amount of money that your business has generated from sales or other sources of income. To calculate your revenue, simply add up all of your revenue streams.
Cost of goods sold
Your cost of goods sold is the direct cost of the goods or services that you have sold. This includes the cost of materials, labor, and shipping. To calculate your cost of goods sold, simply add all your cost of materials and labor.
Gross profit
Your gross profit is the difference between your revenue and your cost of goods sold. This is also sometimes referred to as your "gross margin." To calculate your gross profit, simply subtract your cost of goods sold from your revenue.

Calculate Total Expenses

Once you have calculated your net income, you can begin calculating your total expenses. This includes both your business expenses and your business use of home expenses.
Operating Expenses
Your business expenses are the costs associated with running your business, such as rent, utilities, advertising, and wages. To calculate your business expenses, simply add up all of your business expenses.
Tentative profit and loss amount
Your tentative profit and loss amount is the difference between your gross profit and your business expenses. This is a preliminary number that can help you determine whether or not your business is profitable. To calculate your tentative profit and amount, simply subtract your operating expenses from your gross profit.
Expenses for business use of home
If you operate your business out of your home, you may be able to deduct a portion of your rent or mortgage payments as well as your utilities and other expenses. These expenses can be deducted from your gross income on your profit and loss statement.

Net Profit

Your net profit is the final profit or loss figure for your business. This number is arrived at after all deductions have been made. To calculate your business profit, simply subtract your total expenses from your gross income.
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What about a Balance Sheet?

Your profit and loss statement will give you a snapshot of your business's financial health over a period of time. However, it is important to remember that a profit and loss statement is only one part of your overall financial picture. For a more complete picture of your business's finances, you'll also need to create a balance sheet.

A balance sheet is a report that shows your business's assets, liabilities, and equity at a specific point in time. This information can be helpful in determining whether or not your business is financially stable. To create a balance sheet, you'll need to gather information on your business's assets and liabilities. You can find template balance sheets online or through accounting software programs.
So there you have it, the profit and loss statement in all its glory. This is an essential document for all businesses, no matter how small. And now that you understand what goes into it, you can create your own profit and loss statement with our handy template. Start gathering those receipts and get calculating!

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