What is a profit and loss statement?

A profit and loss statement is a financial report that shows what your business earned and spent over a set period. The difference between the two tells you whether you made a profit or a loss.

You'll also hear it called a P&L or an income statement, and in Indonesia it's the laporan laba rugi. The Corporate Finance Institute's P&L guide adds the statement of operations as another name and notes that it's built on accrual principles.

Think of your P&L as the final score for a month or a quarter. Say your Bandung coffee shop sells Rp150 million of drinks in a month and spends Rp130 million. Your P&L shows a Rp20 million profit.

What does a profit and loss statement include?

A P&L breaks your finances into a handful of line items, with sales at the top and profit at the bottom. Most statements include these components.

Revenue, which is the total income from sales before any costs come out
Cost of goods sold (COGS), which covers the direct cost of making or buying what you sell
Gross profit, which is revenue minus COGS
Operating expenses, which are day-to-day running costs such as rent, salaries, utilities and marketing
Operating profit, which is gross profit minus operating expenses
Net profit or net loss, which is what remains after interest and tax

Some businesses also track EBITDA (earnings before interest, tax, depreciation and amortisation) to see profit from core operations. It's a supplementary analysis figure, and Indonesia's accounting standards (Standar Akuntansi Keuangan, or SAK) don't require it on your P&L.

The profit and loss formula

The core P&L formula is simple: revenue minus total expenses equals net profit or net loss. A positive result is a profit, and a negative result is a loss.

A multi-step P&L splits that formula into smaller calculations, so you can see where profit is made or lost. These are the formulas you'll use most.

Gross profit equals revenue minus COGS
Operating profit equals gross profit minus operating expenses
Net profit equals operating profit minus interest and tax
COGS equals opening inventory plus purchases minus closing inventory

The COGS formula matters if you hold stock. Say you start the quarter with Rp20 million of inventory, buy Rp150 million more and finish with Rp8 million. Your cost of goods sold is Rp162 million.

How to read a profit and loss statement

Read a P&L from the top down, starting with revenue and finishing at net profit. Each line tells you something different about how the business is performing.

Gross profit shows how well you're pricing and sourcing what you sell. To find your gross profit margin, divide gross profit by revenue and multiply by 100. If your gross profit is Rp60 million on revenue of Rp150 million, your gross profit margin is 40%.

A falling gross profit margin can point to rising supplier prices or discounting. Further down, operating profit shows whether your day-to-day costs are under control before interest and tax.

Net profit margin is net profit divided by revenue, multiplied by 100. It tells you how much of every rupiah in sales stays in the business once all costs, interest and tax are paid.

How to prepare a profit and loss statement

Preparing a P&L follows the same order as reading one. Work through these six steps for any period you choose.

Choose your reporting period, such as a month or a quarter.
Add up your revenue from sales and any other income earned in that period.
Calculate your COGS using the direct costs of the goods or services you sold.
Subtract COGS from revenue to find your gross profit.
List and total your operating expenses, including rent, wages, utilities and marketing.
Subtract operating expenses, interest and tax from gross profit to find your net profit or net loss.

If you're starting out, a profit and loss template gives you the layout ready to fill in. Accounting software with built-in financial reports can produce the P&L for you from transactions you've already recorded.

Profit and loss statement example

A worked example makes the formulas easier to follow. Here's a simplified multi-step P&L for Kopi Senja, a fictional coffee shop in Bandung, for the quarter ending 30 June 2026.

Revenue of Rp450 million from coffee and food sales
COGS of Rp162 million for coffee beans, milk, sugar and pastries
Gross profit of Rp288 million, which is revenue minus COGS
Operating expenses of Rp216 million for rent, staff wages, utilities and marketing
Operating profit of Rp72 million, which is gross profit minus operating expenses
Interest and tax of Rp16.2 million
Net profit of Rp55.8 million, which is operating profit minus interest and tax

Kopi Senja's gross profit margin is 64% (Rp288 million divided by Rp450 million). Its net profit margin is 12.4% (Rp55.8 million divided by Rp450 million). In plain terms, the owner keeps about Rp124 of every Rp1,000 in sales as net profit.

Single-step vs multi-step profit and loss statements

There are two common P&L formats. The right one depends on how much detail you need to run your business.

A single-step P&L adds up all revenue and subtracts all expenses in one calculation to reach net profit. It suits sole proprietors and businesses with simple finances.

A multi-step income statement separates operating items from non-operating ones, showing gross profit and operating profit before net profit. That extra detail shows you exactly where your money is going.

How a profit and loss statement differs from a balance sheet and cash flow statement

Your P&L, balance sheet and cash flow statement each answer a different question about your business. Reading them together gives you the full financial picture.

The P&L shows performance over a period: what you earned and spent, and whether that left a profit or a loss
The balance sheet shows your position on a single date: what you own, what you owe and the owner's equity
The cash flow statement shows how cash actually moved in and out during the period

The statements are linked, because net profit from your P&L flows into equity on your balance sheet. Your P&L can show a healthy profit while your bank balance is low, for example when customers haven't paid their invoices yet.

Pairing your P&L with a cash flow forecast closes that gap. The forecast shows when money will actually arrive, so you can plan payments with confidence.

How to use a profit and loss statement to make business decisions

A P&L is most useful when you compare it with something. Set this month's figures against last month, and then against your budget.

Look for variances, which are the gaps between what you expected and what happened. If Kopi Senja's milk costs rose by Rp3 million to Rp15 million while sales stayed flat, that's a 25% jump worth checking with suppliers.

Once you know the cause, you can act on it, for example by adjusting prices or switching to a better-value supplier. A steady P&L history also helps when you apply for business finance, because it shows lenders how your business earns and spends.

A monthly review is frequent enough to catch problems early. It also builds a clean set of figures for year-end reporting.

Profit and loss statements in Indonesia

In Indonesia, your P&L is part of both company law and tax reporting. The rules that apply depend on your business structure and size.

Company reporting and audit rules

If you run a limited liability company (perseroan terbatas, or PT), Law No. 40 of 2007 sets out what your annual report must contain. Under Article 66 of the company law, the annual report's financial statements include a P&L, balance sheet, cash flow statement and statement of changes in equity.

Article 68 of the same law makes an audit by a public accountant mandatory when your company's assets and/or turnover reach at least Rp50 billion. An audit is also required when other conditions in the law apply.

Accounting standards for private businesses

The accounting standard you follow shapes how your P&L is presented. The private entity standard (SAK EP) took effect on 1 January 2025, replacing SAK ETAP (the standard for entities without public accountability).

Micro, small and medium businesses can use the SAK EMKM standard instead. At a minimum, it requires a statement of financial position, a laporan laba rugi and notes to the financial statements.

Tax filing and record keeping

Your P&L also supports your annual corporate income tax return (SPT Tahunan PPh Badan). Corporate taxpayers attach a balance sheet and P&L to this return, whether they pay final or non-final tax.

The standard corporate income tax rate is 22%. Article 31E of the Income Tax Law gives companies with turnover up to Rp50 billion a 50% rate cut on part of their taxable income.

Government Regulation (PP) 20/2026 took effect on 22 April 2026. It limits the 0.5% final income tax to individuals, one-person PTs (perseroan perorangan) and cooperatives with turnover up to Rp4.8 billion. You'll also need to keep the books and documents behind your P&L in Indonesia for 10 years, under the tax record retention rules.

Track your profit and loss with Xero

A current P&L gives you the confidence to set prices and plan spending. With Xero, automated bank feeds keep your transactions up to date, so your P&L report is ready whenever you need it.

You can check your margins at any time and share the same figures with your accountant or bookkeeper in real time. Try it with your own numbers and get one month free to see your P&L update as you work.

FAQs on profit and loss statements

Here are quick answers to common questions about profit and loss statements.

Is it called P&L or PNL?

Both refer to the same report. P&L is the standard written form in accounting, while PNL is an informal shorthand you'll often see in search terms and chat.

How often should you prepare a profit and loss statement?

Prepare one at least monthly for managing the business, and a full-year version for your annual report and tax return. If your sales are seasonal, weekly checks during peak months help you react faster.

Does a profit and loss statement need to be audited in Indonesia?

Only when your PT meets an audit trigger in company law, such as assets and/or turnover of at least Rp50 billion. Below that level, you still prepare a P&L, and an accountant's review can catch errors before you file.

What is accrual accounting and how does it affect a P&L?

Accrual accounting records revenue when you earn it and expenses when you incur them, whatever the payment date. Your P&L can therefore include sales still sitting in accounts receivable and bills you haven't paid yet.

What is the P&L called in Indonesian?

It's called the laporan laba rugi, where laba means profit and rugi means loss. The balance sheet is usually called the neraca or laporan posisi keuangan.

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Disclaimer

This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.

What is a profit and loss statement?

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