Understanding Your Profit & Loss Report
Overview
Your Profit & Loss (P&L) report shows your business’s revenue, expenses, and costs over time. If you manage multiple businesses, you can view profit and loss for each business individually or all together—and even include or exclude your personal finances in the report.
Also called an Income Statement, the P&L report subtracts your business expenses from your income to reveal your net profit or loss.
This report helps you understand your overall business performance, make pricing decisions, plan for taxes, and identify areas where you’re spending too much or earning too little.
Unlike your bank balance, which shows cash on hand, your P&L shows your actual profitability.
🔍 What’s Your Situation?
Scenario 1️⃣: You want to see if your business was profitable last quarter
→ Use: Quarterly P&L Review
Scenario 2️⃣: You’re preparing for tax season and need to understand deductible expenses
→ Use: Annual Tax Preparation P&L
Scenario 3️⃣: A lender or investor wants to see your business performance
→ Use: Multi-Period P&L Comparison
💬 Tip: Your P&L might show profit even when your bank account is low (clients haven’t paid yet), or show a loss when you still have cash (you prepaid expenses). That’s normal!
How to Use Each Method
1️⃣ Quarterly P&L Review
When to use it: To check business performance every three months and make strategic decisions.
Steps:
Go to Reports > Business Reports > Profit & Loss.
Set the date range to Last Quarter and click Apply Dates.
Review the three main sections: Income, Expenses, and Net Profit/Loss.
Compare your profit margin by dividing Net Profit by Total Income.
✅ Result: You’ll know if your business is profitable and can spot seasonal trends or concerning expense patterns.
2️⃣ Annual Tax Preparation P&L
When to use it: To gather information for Schedule C or share with your tax preparer.
Steps:
Go to Reports > Business Reports > Profit & Loss.
In the Business/Personal dropdown, select the business entities (and personal finances, if needed).
For the date range, select This Year or Last Year (Jan 1 – Dec 31) and click Apply Dates.
Adjust display preferences (row, column, interval).
Review expense categories to confirm proper tax-deduction classification.
Check for personal expenses that shouldn’t be included.
Click the Settings gear ⚙️ to verify or change your accounting method (Accrual or Cash).
Click the More actions menu (⋮) and select Export > CSV for your tax preparer.
✅ Result: You’ll have organized income and expense totals ready for tax filing—potentially saving time and accounting fees.
3️⃣ Multi-Period P&L Comparison
When to use it: To present business performance to lenders, investors, or partners.
Steps:
Generate P&L reports for multiple periods (for example, Current Year vs. Last Year, or Quarterly comparisons).
Create a summary highlighting growth in revenue, expense-category changes, and profit trends.
Calculate key ratios like profit margin % and expense-to-revenue ratios.
Prepare talking points about any significant changes or improvements.
✅ Result: You’ll have professional documentation that demonstrates your business growth and financial management capabilities.
📌 Best Practices and Common Mistakes
Don’t confuse cash flow with profit—your P&L shows earned income and incurred expenses, not necessarily cash in/out.
Always review expense categories for correct classification—personal expenses mixed in will skew your results.
Double-check that all business income is captured, including cash, digital, and bartered payments.
Run reports regularly: monthly for active management, quarterly for strategic planning.
💡 Helpful Tips and Special Notes
How Partial Payments Appear in Your Profit & Loss Report
When you record partial payments on invoices in Quicken Business & Personal, those payments are automatically reflected in your Profit & Loss (P&L) report based on the amount actually received.
If an invoice includes multiple line items, Quicken divides the partial payment evenly across each item.
For example, if you record a $500 partial payment on a $1,000 invoice with two items, each item shows $250 of income in your P&L report.
This ensures your income is reported accurately—even when invoices are only partially paid.
💡 Tip: When the remaining balance is paid, your P&L report automatically updates to include the full invoice amount.