The profit and loss account is the statement showing a business's income and expenses over a period, and the profit or loss that results. Under FRS 102 it is also called the income statement.
What it shows
The profit and loss account covers a period, usually a year, where the balance sheet shows the position on a single date. A typical layout runs:
- Turnover — sales for the period, excluding VAT
- less cost of sales = gross profit
- less administrative expenses = operating profit
- plus or minus interest = profit before tax
- less tax = profit for the year
The profit for the year, less any dividends paid, is added to the reserves on the balance sheet.
Who sees it
The members and HMRC always receive the profit and loss account. A small company or micro-entity can currently leave it out of what it files at Companies House, known as filing filleted accounts. From 1 April 2028 it will have to be delivered to Companies House as well.
Read more: Full or filleted: what gets filed where.