What does a Profit and Loss statement show?

• A. The cash balance at a specific date
• B. The market value of assets
• C. The income and expenses of a business for a defined period
• D. The net worth of the company

Answer: (C)

A Profit and Loss statement shows the income and expenses of a business over a defined period, producing net income or net loss for that period. This focuses on performance over time—how much the company earned and what it spent—during that period, rather than a snapshot of cash on hand, asset values, or overall equity.

It includes revenues (sales, services), and expenses (cost of goods sold, payroll, utilities, depreciation, interest, etc.), with the result being net income or loss. This is different from a cash balance, which reflects cash available at a single date; or the market value of assets, which appears on a balance sheet; or the net worth (owner’s equity), which also appears on the balance sheet. The P&L is about period performance, not current cash position or asset valuation.