A profit and loss (P&L) template is a spreadsheet that shows your revenue, costs and expenses over a period and calculates whether the business made or lost money. Download the free Excel template below. It covers 12 months with an annual total and automatically calculates net revenue, gross profit, gross margin, operating income, an estimated income tax and net profit margin.
- Revenue lines with returns, discounts and allowances
- Cost of goods sold, including freight, duties and tariffs
- Ten common operating expense lines
- Gross profit, operating income (EBIT), pre-tax income and net income
- Gross, operating and net margin percentages for every month
- Estimated income tax at a rate you set
- Jan–Dec columns plus an annual total, and a filled-in example
What Is a Profit and Loss Statement?
A profit and loss statement, also called a P&L or income statement, summarizes revenue and expenses over a period of time, such as a month, quarter or year. It answers one question: did the business make a profit? Together with the balance sheet and the cash flow statement, it is one of the three core financial statements.
The template uses a multi-step format, which shows profit at each stage:
Net revenue − Cost of goods sold = Gross profit
Gross profit − Operating expenses = Operating income (EBIT)
Operating income − Interest + Other income − Taxes = Net income
What Goes in a Profit and Loss Template
- Revenue: sales and service revenue, less returns, discounts and allowances.
- Cost of goods sold (COGS): the direct cost of what you sold, such as materials and inventory purchases, direct labor, freight-in, customs duties and tariffs.
- Operating expenses: salaries, rent, utilities, marketing, insurance, software, professional fees, travel, depreciation and other overhead.
- Other income and expenses: interest on loans and lines of credit, and non-operating income.
- Income tax and net income: the template estimates tax on positive pre-tax income at the rate you enter. Replace it with your actual tax figure if you have one.
How to Fill Out the P&L Template
- Enter your company name, fiscal year and an estimated tax rate.
- Enter monthly revenue. Enter returns, discounts and allowances as negative numbers.
- Enter cost of goods sold. Importers should include freight-in, duties and tariffs here, because they are part of what the goods cost.
- Enter operating expenses for each month.
- Enter interest expense as a positive number. The template subtracts it.
- Review the margins. Compare gross and net margin month by month to spot pricing or cost problems early.
Profit and Loss Example
Annual totals from the template's Example sheet for Acme Imports LLC:
| Line item | Annual total | % of net revenue |
|---|---|---|
| Net revenue | $1,282,800 | 100.0% |
| Cost of goods sold | $786,600 | 61.3% |
| Gross profit | $496,200 | 38.7% |
| Total operating expenses | $329,400 | 25.7% |
| Operating income (EBIT) | $166,800 | 13.0% |
| Interest expense | $7,800 | 0.6% |
| Income before taxes | $159,000 | 12.4% |
| Income tax (estimated at 21%) | $33,390 | 2.6% |
| Net income | $125,610 | 9.8% |
The business keeps about 39 cents of gross profit from every dollar of sales, and about 10 cents of net profit after all expenses.
Key P&L Formulas
| Metric | Formula | Why it matters |
|---|---|---|
| Gross margin | Gross profit ÷ net revenue | Shows pricing power and product costs |
| Operating margin | Operating income ÷ net revenue | Shows how efficiently you run the business |
| Net profit margin | Net income ÷ net revenue | What you keep from each dollar of sales |
| Break-even revenue | Fixed costs ÷ gross margin | Sales needed to cover all fixed costs |
Common P&L Mistakes
- Putting inventory purchases in operating expenses. Product costs belong in COGS, or your gross margin will look wrong.
- Leaving out landed costs. Freight, duties and tariffs are part of COGS for imported goods.
- Recording owner draws as expenses. Draws and loan principal repayments are not expenses. Only interest goes on the P&L.
- Mixing cash and accrual. Use one method consistently. Most lenders expect accrual-based statements.
- Ignoring seasonality. Compare a month with the same month last year, not just the previous month.
Profit vs Cash: Why Both Matter
A P&L can show a healthy profit while the bank balance shrinks. Revenue is recorded when you invoice, but cash arrives only when customers pay, often on 30, 60 or 90-day terms. Inventory you buy ahead of a busy season also uses cash before it shows up as cost of goods sold. Read more in cash flow vs revenue, and track the timing with a 13-week cash flow forecast.
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Frequently Asked Questions
What is a profit and loss template?
A profit and loss (P&L) template is a spreadsheet that lists your revenue, cost of goods sold and expenses for a period and calculates gross profit, operating income and net income automatically.
Is a P&L the same as an income statement?
Yes. Profit and loss statement, P&L and income statement are different names for the same report, which shows revenue minus expenses over a period of time.
What is the difference between gross profit and net income?
Gross profit is net revenue minus cost of goods sold. Net income is what remains after you also subtract operating expenses, interest and taxes.
How often should I prepare a profit and loss statement?
Monthly is best for most small businesses, so you can spot margin changes early. You will also need quarterly and annual P&Ls for taxes, lenders and investors.
Can a business be profitable but run out of cash?
Yes. The P&L records revenue when it is earned, not when cash arrives. If customers pay slowly or you buy inventory ahead of sales, profit and cash can move in different directions. A cash flow statement shows the difference.
