Profit and Loss
What is a profit and loss account? Please note: This fact sheet should act as a basic introduction to profit and loss accounts for practice
management with little financial knowledge. Refer to other sources for a more detailed understanding of budgets if required.
A profit and loss (P&L) account, also known as an income statement, is a crucial financial report that summarises your practice's revenues, costs, and expenses over a specific period, typically a fiscal quarter or year. This statement provides a comprehensive snapshot of your practice's financial performance, detailing how much profit or loss has been generated during the period. The P&L account begins with the total revenue earned from services and other income sources. It then deducts the cost of goods sold (COGS) to determine the gross profit. Following this, operating expenses such as salaries, rent, utilities, and marketing costs are subtracted to calculate the operating profit. The statement may also include non-operating income and expenses, such as interest and taxes, to arrive at the net profit or loss. By analysing the P&L account, you can easily assess your practice's profitability, operational efficiency, and overall financial health. It serves as a valuable tool for management to make informed decisions, investors to evaluate potential returns, and creditors to assess your practice's ability to meet its financial obligations.
Future Practice Owner.
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