Your profit and loss account (P&L) shows business performance. It measures how much money you made, and how you made it, over a specific period. It can measure profitability of:

• trading over short periods like a month
• trading over longer periods like a year
• specific projects,
• specific clients.

What a profit & loss account looks like

Most P&L’s are set out in a logical format that’s easy to follow:

Download the dmzine P&L sample to see an explanation of the various parts of a P&L.

Profit

Some computerised accounting systems may lay the figures out differently, but when accounts are printed, they are generally shown in this format.

To make a P&L meaningful you should breakdown the income and expenses.

For example our accounts itemises Income under a sub-category of professional fees which includes design, photography/illustration, artwork, new media, design management and couriers/deliveries.

Expenses are broken down into 25 items such as accounting, bank charges, insurance, leases and rent through to staff training and WorkCover premiums.

The amount of detail really depends on the types of costs you need to track.

Summary

P&L’s are not a difficult concept and deal with the day-to-day running of a design studio. Understanding your P&L can ensure you have a profitable business.

Article republished with permission from dmzine illustration for Streamtime by Janine Wareham