P&L vs. Income Statement: What’s the Difference?

Is a P&L the Same as an Income Statement?

P&L statement or income statement? This is a common question from individuals new to finance. In most cases, “P&L” and “income statement” mean the same thing: a report showing a company’s revenues, expenses, and profit or loss over a specific period. 

Using the terms interchangeably is generally acceptable, although a small but important nuance does exist:

• Income statement is the formal term used in external financial reporting under US GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards).
• “P&L” is often used informally by business leaders, department heads, or team leads looking for a quick summary. 

This guide covers what’s in a P&L/income statement, who uses it, and how it connects with other key financial statements to reveal a company’s financial health. 

Now that you know what the terms mean, let’s take a closer look at what’s actually inside a typical income statement — and why each part matters.

The Income Statement (P&L): What You’ll Find and Why It Matters

Beyond just tracking revenues and expenses, an income statement (or P&L) captures the full story of a company’s profitability over time. Whether you call it a P&L or an income statement, think of it as your organization’s report card for a quarter or year. It tells a story about how the business performed along the way to a profit or loss. 

Depending on the organization, you might also hear it referred to as an “earnings statement” or “statement of operations.”

Here’s a breakdown of the key sections you’ll typically find on an income statement and what each one reveals about a company’s performance.

• Revenue: The total income earned from selling products or services, often called the “top line” because it sits at the top of the income statement.
• Cost of Goods Sold (COGS): The direct costs tied to producing goods or delivering services. Subtracting COGS from revenue gives you gross profit.
• Gross Profit: Revenue minus COGS, showing how efficiently a company produces or delivers its products.
• Operating Expenses: Costs not directly tied to production, such as rent, salaries, marketing, and administration. Keeping these in check is key to profitability.
• Operating Income (EBIT): Earnings from core business operations after operating expenses are deducted, a critical measure of day-to-day business health.
• Net Income: The final profit or loss after accounting for all revenues, expenses, taxes, and interest, often called the “bottom line” because it tells the ultimate financial result.

Remember that income statements provide only one perspective on a company’s financial health, but it doesn’t tell the whole story. For a comprehensive view, always analyze the balance sheet and cash flow statement alongside the income statement.

Real Income Statement Showing Profit & Loss

Here’s a real-world example to see these concepts in action. 

Amazon’s 2024 income statement (which Amazon formally titles ‘Consolidated Statement of Operations’) is provided below. Notice how they’ve organized their revenues and expenses. Pay special attention to the dramatic improvement in their net income from 2022 to 2024.

Amazon posted a net loss of $2.7 billion in 2022, then net income of $30.4 billion in 2023 and $59.2 billion in 2024. 

Amazon’s income statement breaks down as follows:

• Total revenue, including product sales and service sales. 
• Operating expenses, including cost of sales, fulfillment, marketing, technology, G&A, and other items.
• Operating income, or Earnings Before Interest and Taxes (EBIT), reflects the amount left after deducting operating expenses.

• Interest expense and taxes

• Net income, also called profit or loss, which is the amount left over after deducting interest expense and taxes.

How Different Professionals Use Income (P&L) Statements

Finance professionals rely on income statements for different reasons depending on their role and goals. Your CFO might be focused on one aspect, while your investors care about something else entirely. 

Here’s a quick look at who uses these statements and what they’re looking for:

Whether it’s a CFO, investor, or analyst, the goal is the same: to extract insights from the numbers. Next, let’s look at how professionals break down an income statement to find the story behind the figures.

How Professionals Analyze Income Statements to Find Insights

A deep analysis of an income statement surfaces patterns in growth, operational efficiency, and profitability. This gives you a clearer view of a company’s financial momentum.

Financial analysts use the following core techniques to dig deeper: 

• Vertical analysis: Compare each line item to total revenue to spot shifts in cost structure and profitability.
• Margin analysis: Track gross, operating, and net profit margins to assess efficiency at each stage.
• Benchmarking: Measure key financial metrics against industry peers to evaluate competitive performance.
• Horizontal trend analysis: Identify growth patterns and financial risks by tracking results over multiple periods.

Analyzing an income statement the right way helps you see where a company has been and where it might be headed.

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How an Income Statement Connects to a Balance Sheet and Cash Flow Statement

To truly understand a company’s financial health, you need to examine how the income statement connects with the balance sheet and cash flow statement.

Balance Sheet

The balance sheet shows what a company owns, what it owes, and how it finances its operations at a specific point in time. It’s based on the core accounting equation:

Assets = Liabilities + Shareholders’ Equity

• Assets: Resources the company owns (cash, inventory, equipment).
• Liabilities: Obligations the company owes to others (loans, accounts payable).
• Equity: The owners’ share of the business after liabilities are subtracted.

Cash Flow Statement

The cash flow statement tracks the money moving into and out of the business, broken into three categories:

• Operating activities: Cash from core business operations.
• Investing activities: Cash spent on or earned from buying and selling long-term assets.
• Financing activities: Cash related to borrowing, repaying debt, issuing shares, or paying dividends.

How the Three Statements Connect

• The net income from the income statement flows into the cash flow statement and impacts retained earnings on the balance sheet.
• The cash flow statement explains the changes in the cash balance reported on the balance sheet.

The income statement, balance sheet, and cash flow statement each reveal a different side of a company’s finances. Together, they give you a complete view of business performance, risk, and financial strength.

P&L vs. Income Statement: Turn Knowledge into Practical Financial Skills

Whether you hear “P&L” or “income statement,” the meaning is the same: a profitability report that tells a company’s financial story. What matters most is knowing how to read it, spot key insights, and connect it to the balance sheet and cash flow statement for a full view of a company’s financial health.

If you want to build these analysis skills, CFI’s Financial Analysis Fundamentals course is the perfect place to start. It’s also part of our Financial Modeling & Valuation Analyst (FMVA®) Certification, designed to equip you with the practical skills analysts need to stand out.

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Additional Resources

Forecasting the Income Statement

Profit and Loss Template

Income Statement Template

See all Accounting resources