The Profit & Loss (P&L) section — sometimes called the Income Statement — shows what your business earned and spent over a defined period, usually a tax year. Your AI Tax Accountant P&L is reformatted from your source documents into the GAAP-compliant structure that banks, lenders, and tax preparers expect.
The standard P&L line items
- Revenue (Total Revenue) — gross sales and other income from your core business activity.
- Cost of Goods Sold (COGS) — direct costs to deliver what you sold (inventory, materials, direct labor). Service businesses may have little or no COGS.
- Gross Profit — Revenue minus COGS. The "Gross Margin" percentage shown alongside it tells you how much of each revenue dollar remains after direct costs.
- Operating Expenses — indirect costs that keep the business running (rent, software, marketing, professional fees, payroll for non-COGS staff).
- Net Income — Gross Profit minus Operating Expenses. This is your bottom line for the period.
Accrual vs cash basis
GAAP financial statements are typically presented on the accrual basis, meaning revenue is recognized when earned and expenses when incurred — not when cash changes hands. Many small businesses file taxes on the cash basis. Your tax preparer can reconcile the two. The P&L section is most useful as a structural view of the business, not necessarily a direct match to your tax return.
Year-over-year comparison
When you have multiple years of data uploaded, the P&L shows prior-year columns next to the current year. Large swings — say, marketing expense doubling, or COGS as a percentage of revenue jumping 10 points — are worth investigating before you assume the totals are correct. Often they trace back to a misclassified transaction.
Numbers in the P&L are only as accurate as the transactions feeding them. If a line looks off, jump into Transaction Review or use the Reclassify button to correct the underlying entries.