Profit and Loss Statement

Overview

Profit and Loss Statement

Module: Accounts
Report Type: Script Report
Based on: General Ledger Entries

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Overview – What This Report Tells You

The Profit and Loss Statement shows how much profit or loss your business has made over a specific period. It summarizes income earned and expenses incurred, and clearly presents whether the business is operating at a profit or a loss.

This report answers a critical business question:
“Is my business making money, and where is that money coming from or going?”

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When and Why to Use This Report

You should use the Profit and Loss Statement:

• At month-end, quarter-end, or year-end to review business performance
• Before management meetings or board reviews
• To compare actual performance against budgets or targets
• When planning cost control, pricing, or expansion decisions
• To support discussions with investors, partners, or lenders

It is a core financial report for understanding operational performance, not just cash position.

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Key Sections and Columns Explained

1. Income (Revenue)

Shows money earned from core business activities, such as: - Sales - Service income - Other operating income

Business Meaning:
Indicates how effectively the business is generating revenue.

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2. Cost of Goods Sold (COGS) (if applicable)

Direct costs related to producing goods or delivering services.

Business Meaning:
Helps measure gross profitability and efficiency in production or service delivery.

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3. Gross Profit

Gross Profit = Income – Cost of Goods Sold

Business Meaning:
Shows how profitable your core operations are before overhead expenses.

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4. Operating Expenses

Includes indirect costs such as: - Salaries and wages - Rent and utilities - Marketing and advertising - Administrative expenses

Business Meaning:
Reflects how much it costs to run the business on a day-to-day basis.

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5. Net Profit / Net Loss

Net Profit = Total Income – Total Expenses

Business Meaning:
This is the final result of your operations.
- Positive value → Business is profitable
- Negative value → Business is running at a loss

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Available Filters and Their Business Purpose

• Company
  View performance for a specific legal entity or business unit.

• Date Range
  Analyze performance for a month, quarter, year, or any custom period.

• Cost Center
  Understand profitability by department, branch, or location.

• Project
  Measure profit or loss for specific projects or contracts.

• Finance Book (if used)
  Compare statutory vs management accounting views.

• Periodicity (Monthly / Quarterly / Yearly)
  Track trends and performance over time.

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How to Interpret the Results for Business Decisions

• Rising Revenue, Stable Expenses
  Indicates healthy growth and good cost control.

• Revenue Growth with Faster Expense Growth
  Signals the need to review spending efficiency.

• Declining Gross Profit Margin
  May point to pricing issues, higher production costs, or supplier problems.

• Consistent Operating Losses
  Suggests a need for cost restructuring, pricing changes, or business model review.

• Strong Net Profit but Weak Cash Flow
  Indicates profitability but possible collection or liquidity issues (requires further analysis).

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Common Use Cases and Business Scenarios

• Management Review Meetings
  To assess business performance and decide on corrective actions.

• Budget Comparison
  To check whether actual expenses and income align with planned budgets.

• Cost Optimization
  Identify areas where expenses can be reduced without impacting revenue.

• Pricing Decisions
  Understand whether current pricing covers costs and delivers target margins.

• Investor or Partner Reporting
  Present a clear financial performance summary.

• Business Expansion Evaluation
  Assess whether the business is financially strong enough to grow.

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Summary

The Profit and Loss Statement in Dafater is an essential management tool that provides a clear picture of business performance. It helps leaders understand profitability, control costs, evaluate growth, and make informed strategic decisions based on actual financial results.

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Report Information

• Module: Accounts
• Related DocType: GL Entry
• Report Type: Script Report
• Standard: Yes