Profit and Loss Statement (P&L) What is - Income Statement in English and Thai Explained

P&L Statement (Income Statement) What Does It Signify

Income statement or Profit and Loss Statement (P&L) is a financial report that everyone involved in investment or business management pays attention to because it provides an overall picture of how much profit the business generates, where the profit comes from, and which expenses could potentially be reduced.

For executives and investors, reading the income statement is like reviewing the business’s “identity document.” It helps make informed decisions about expanding the business, adjusting strategies, or making additional investments wisely.

What Is a P&L Statement Actually?

The income statement is a financial document that shows the performance over a specified period, presenting three main pieces of information: total revenue, total expenses, and net profit (or loss).

The meaning of the P&L Statement is that a business can understand:

• Whether it is making a profit or not
• Where the profit is coming from
• Which expenses are high and could be reduced
• The overall direction of the business operations

From this data, the business can plan strategies aligned with market conditions and forecast future performance.

Basic Formula for Calculating the P&L Statement

The fundamental calculation of the income statement is as follows:

Total Revenue (Total Revenue) − Total Expenses (Total Expenses) = Profit or Loss (Profit or Loss)

Components of the Formula

Total Revenue (Total Revenue)
Refers to cash or assets received from selling goods or providing services, summed over the period.

Total Expenses (Total Expenses)
Refers to cash or items paid out by the business to operate, such as rent, wages, advertising, utilities, etc.

Profit or Loss (Profit or Loss)
The difference between total revenue and total expenses:

• If revenue exceeds expenses → Business has profit
• If revenue is less than expenses → Business has a loss

Structure of the P&L Statement (Income Statement)

In reality, the P&L statement is broken down into more detailed items than just the basic formula, such as:

What Do Each Profit Level Indicate?

By subtracting expenses at each stage, we get profit figures at different levels, each with its own significance:

###Gross Profit(
Formula: Revenue − Cost of Goods Sold

Indicates how much the business can set prices above costs. It is the “pure profit” before the business incurs further expenses. A low gross profit may suggest high production costs or inappropriate pricing.

)Operating Profit###
Formula: Gross Profit − Operating Expenses

Shows whether the core business operations are performing well. It excludes concerns about financing or taxes, focusing solely on operational efficiency.

(Net Income)
Formula: Total Revenue − Total Expenses

Represents the final “savings” of the business after all expenses. It is often the most closely watched figure by investors because it reflects the true profitability capability of the business.

Types of P&L Statements

The income statement is generally divided into two main formats, each with its own characteristics and advantages:

1. Report Form (Report Form)

Format Characteristics:

• Arranged linearly from top to bottom
• Divided into 3 sections: Revenue → Expenses → Net Profit/Loss
• Has a header with 3 lines: Business name, “Income Statement,” and the period

Example: