Profit and loss statement (P&L)
Learn what a profit and loss statement shows, how to prepare and read one, and the rules for Singapore businesses.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- A profit and loss statement (P&L), or income statement, shows your revenue and costs for a set period and whether you made a profit
- Working down the statement to net profit shows where your money goes: direct costs, running costs, interest and tax
- Reviewing your P&L every month or quarter helps you spot trends early and act on rising costs before they eat into profit
- In Singapore, sole proprietors and partners prepare a statement of accounts for IRAS, while companies prepare financial statements under Singapore Financial Reporting Standards
What is a profit and loss statement?
A profit and loss statement is a report showing your earnings and spending over a set period, and whether you made a profit or loss. You might also hear it called a P&L, an income statement or a statement of profit or loss.
It can cover a month or a full financial year. It works like a match report: it covers everything that happened across the whole game, and the final score sits on the bottom line.
The top line is your revenue from sales. Each line below takes away a type of cost until you reach net profit or loss.
Why a profit and loss statement matters
Your P&L quickly shows whether your business is making money. It’s also the report lenders and IRAS expect to see.
A regularly updated profit and loss statement helps you:
- see whether your prices cover your costs and still leave a profit
- find expenses that are growing faster than sales
- support a loan or grant application with clear figures
- have your accounts ready at tax time
Once your P&L is up to date, you can use it to measure your business’s profitability with ratios such as gross and net margin.
What does a profit and loss statement include?
Most P&L statements follow the same order, with sales at the top and profit at the bottom. These are the main line items you’ll see.
- Revenue is the income from selling your goods or services before any costs are deducted
- Cost of goods sold (COGS) is the direct cost of what you sell, such as ingredients or stock
- Gross profit is revenue minus COGS
- Operating expenses are the costs of running the business, such as rent, salaries, utilities and marketing
- Operating profit is gross profit minus operating expenses
- Other income and expenses cover items outside your main trade, such as interest or a one-off gain on selling equipment
- Net profit (or net loss) is what’s left once every cost, including interest and tax, comes off
Some reports also show earnings before interest, tax, depreciation and amortisation (EBITDA). This is operating profit with depreciation and amortisation added back.
The split between COGS and operating expenses tells you a lot. For a café, coffee beans are COGS because every cup uses them, while the rent stays the same whether you sell 10 cups or 1,000.
Profit and loss statement formula
The P&L formula works from the top down, taking away one group of costs at a time.
- Revenue minus cost of goods sold equals gross profit
- Gross profit minus operating expenses equals operating profit
- Operating profit plus other income, minus other expenses and tax, equals net profit
In its shortest form, net profit is total revenue minus total expenses. To turn it into a percentage, divide net profit by revenue and multiply by 100, which gives you your net profit margin.
How to prepare a profit and loss statement
You can build a P&L in a spreadsheet by following six steps. It’s much faster if you record your transactions regularly, so every sale and bill is already in one place.
- Choose your reporting period, whether that’s a month, a quarter or your financial year.
- Add up all revenue from sales for the period.
- Total your cost of goods sold: the direct costs of the products or services you sold.
- Subtract COGS from revenue to get your gross profit.
- List and total your operating expenses, such as rent, wages, utilities and marketing.
- Subtract operating expenses, adjust for other income and expenses, then deduct tax to reach net profit or net loss.
If you’re GST-registered, the 9% GST you charge is collected on behalf of IRAS, so record revenue net of it. Registration is compulsory once your taxable turnover exceeds S$1 million.
To save time on layout, download a free P&L template and add your own figures.
Profit and loss statement example
Here’s a simplified P&L for a fictional Singapore café for the quarter ending 30 June 2026. It uses the multi-step format, so you can see each subtotal.
- Revenue from food and drink sales: S$150,000
- Cost of goods sold (coffee beans, milk, pastries and packaging): S$54,000
- Gross profit (revenue minus COGS): S$96,000
- Operating expenses (rent, staff wages, utilities and marketing): S$72,000
- Operating profit (gross profit minus operating expenses): S$24,000
- Interest and tax: S$5,400
- Net profit: S$18,600
That gives the café a gross profit margin of 64% (S$96,000 ÷ S$150,000 × 100). Its net profit margin is 12.4% (S$18,600 ÷ S$150,000 × 100). In other words, the owner keeps about 12 cents of every dollar customers spend.
Operating expenses take 48% of revenue, far more than interest and tax. That tells the owner rent and wages are where small savings would lift profit the most.
How to read a profit and loss statement
Read from the top down, checking what each subtraction takes away before you reach net profit.
Your gross profit margin is gross profit divided by revenue, multiplied by 100. If your gross profit is S$60,000 and revenue is S$150,000, your gross margin is 40%. A falling figure can point to higher supplier prices or heavy discounting.
Below gross profit, operating expenses show what it costs to run the business day to day.
Cost pressure is one reason to watch this part of the statement closely. The Singapore Business Federation’s National Business Survey found its Business Sentiment Index fell 2.1 points to 51.3 in Q1 2026 as cost pressures intensified and profit expectations weakened.
Net profit margin shows how much of each dollar of sales you keep once every cost is paid. A quick margin calculator makes it easy to compare one period with the next.
Once you have your margins, run through these checks:
- confirm every transaction for the period is recorded and reconciled
- compare each line with the same period last year
- check how much revenue comes from regular customers you expect to keep
- make sure related lines move together, so COGS rises roughly in step with sales
Single-step vs multi-step profit and loss statements
There are two common P&L formats, and the right one depends on how much detail you want.
A single-step statement uses one equation: total revenue and gains minus total expenses and losses. A multi-step statement splits revenue and expenses into operating and non-operating groups, so you see gross profit and operating profit along the way.
Single-step suits sole proprietors with simple finances. Multi-step, as in the café example, shows exactly where margin is lost, which helps when you’re setting prices or cutting costs.
Profit and loss statement vs balance sheet vs cash flow statement
Your P&L, balance sheet and cash flow statement each answer a different question about your business.
A P&L covers a period, while a balance sheet shows what the business owns and owes, plus owners’ equity, on a single date. Net profit flows into that equity, and a cash flow statement tracks how cash actually moved over the same period.
Under accrual accounting, you record a sale when you make it, even if the customer pays 30 days later. So your P&L can show a profit while your bank balance is tight. It helps to understand how cash and accrual methods differ before you choose one.
Profit and loss statements in Singapore
In Singapore, your P&L feeds straight into what you report to the Inland Revenue Authority of Singapore (IRAS). The rules for sole proprietors and partnerships differ from those for companies.
Sole proprietors and partnerships
If you’re a sole proprietor or precedent partner, you must prepare a statement of accounts made up of a P&L and a balance sheet. If your revenue is S$500,000 or more, you submit certified accounts; below that, you still prepare them and keep proper records.
You report business income using a 2-line statement if revenue is S$200,000 or less, and a 4-line statement if it’s more than S$200,000. The longer version asks for revenue, gross profit, allowable business expenses and adjusted profit, which map neatly onto your P&L.
IRAS expects you to keep records for five years.
Companies
Companies file one of three corporate tax returns, depending on revenue. Form C-S is for companies with revenue of S$5 million or below, which prepare financial statements and submit them only when IRAS asks.
Form C-S (Lite) is for revenue of S$200,000 or below, with the same rule on financial statements. Form C covers all other companies, which file financial statements alongside the return.
Your net profit is the starting point for your company’s chargeable income in each year of assessment (YA). Companies pay a flat 17% corporate income tax (CIT), and the YA2026 CIT Rebate is 50% of tax payable, capped at S$40,000 in total benefits.
Companies prepare financial statements under one of the accounting standards set in Singapore: Singapore Financial Reporting Standards (International) (SFRS(I)), Financial Reporting Standards (FRS) or SFRS for Small Entities. Your accountant can confirm which one fits your company.
The Accounting and Corporate Regulatory Authority (ACRA) sets the audit rules for companies. Under ACRA’s current audit exemption rules, a private company qualifies if it meets two of these tests in each of the previous two financial years:
- total annual revenue of S$10 million or less
- total assets of S$10 million or less
- 50 employees or fewer
ACRA is reviewing these thresholds, so check its latest guidance before your next financial year end.
Track your profit and loss with Xero
Xero keeps your P&L current as bank feeds bring in your transactions. You can run financial reports like your P&L whenever you need them and work on the same figures with your accountant in real time.
With up-to-date numbers, you spot cost pressure sooner and head into tax season with accounts ready for IRAS. Try it for yourself and get one month free.
FAQs on profit and loss statements
Here are quick answers to common questions about profit and loss statements.
How can I get a profit and loss statement?
You can generate one from accounting software or build your own from a spreadsheet template. If you’d like expert help, you can find a certified advisor near you.
Is a net loss always a bad sign?
A net loss is common when you’re starting out or investing in staff or equipment ahead of growth. Watch whether the loss shrinks over several periods.
Why compare your P&L year on year?
Comparing the same quarter across years removes seasonal swings, such as a busy Chinese New Year period, so you can see genuine growth.
How often should you prepare a profit and loss statement?
Monthly suits most small businesses, giving you time to act on rising costs before the quarter ends. You’ll also need a full-year version for tax filing.
Do owner’s drawings appear on a P&L?
Money a sole proprietor takes out for personal use counts as drawings from equity. It sits on the balance sheet rather than appearing as a P&L expense.
Do loan repayments appear on a P&L?
Only the interest appears on your P&L as an expense. The principal you repay reduces a liability on your balance sheet.
Related terms
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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.