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.
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.
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.