Lesson 3 · 6 minutes
How to Read a Profit & Loss Report.
The P&L is the most important report in your business. Most owners have one but don't know how to read it. After this lesson, you will.
The P&L is the most important report in your business. Most owners have one but don't know how to read it. After this lesson, you will.
Lesson overview
What the P&L does
A Profit & Loss report (also called an Income Statement) shows all your income and all your expenses over a period of time — a month, a quarter, or a year. Read it from top to bottom. It tells the story of your business in numbers.
P&L = Revenue − Expenses = Net Profit (or Loss)
Line 1: Revenue
Revenue (also called turnover or sales) is the total value of all invoices you issued in the period — regardless of whether clients have paid yet. If you offer multiple services, each might appear as its own revenue line: Laundry Income, Express Service, Shoe Cleaning, etc.
Revenue = total invoiced, not total collected
Quiz
You issued Rp 120M in invoices this month. Clients paid Rp 90M of that. What does your P&L show as revenue?
Answer: Rp 120M — the full invoiced amount
In accrual accounting (the standard), revenue is recorded when earned — when you issue the invoice — not when cash arrives. The Rp 30M unpaid sits in Accounts Receivable on your Balance Sheet.
Line 2: Cost of Sales
Cost of Sales (COGS) is what it costs you to actually do the work. For a laundry business: detergent, packaging, delivery costs, wages for the people doing the washing. These costs move with your sales volume — more orders means more COGS.
Gross Profit = Revenue − Cost of Sales
Quiz
Your laundry does Rp 100M revenue. Detergent, packaging, and direct labour cost Rp 45M. What's your gross profit?
Answer: Rp 55M
Rp 100M − Rp 45M = Rp 55M gross profit. This tells you how efficient your service delivery is — before you count overhead like rent and salaries.
Gross profit margin
Gross profit margin is your gross profit as a percentage of revenue. If you made Rp 55M gross profit on Rp 100M revenue, your gross margin is 55%. A healthy gross margin means you have room to cover overhead and still make money. A shrinking gross margin is a warning sign — your cost to deliver is rising faster than your prices.
Gross Margin % = (Gross Profit ÷ Revenue) × 100
Line 3: Operating Expenses
These are your fixed costs: rent, salaries, software, marketing, bank fees. Unlike COGS, they don't directly change with how many orders you process. Operating expenses are sometimes split into Selling Expenses (marketing, commissions) and General & Administrative (rent, accounting, software).
Operating expenses = fixed overhead, not tied to order volume
Quiz
Which of these is an operating expense, NOT a cost of sales?
Answer: Monthly rent for your shop
Rent is an overhead — you pay it whether you process 1 order or 1,000. Detergent, packaging, and delivery are direct costs that scale with volume — those are Cost of Sales.
The bottom line
Net profit is your gross profit minus all operating expenses. It's the final answer to 'did the business make money this period?' A positive number means you're profitable. A negative number means you spent more than you earned — a loss.
Net Profit = Gross Profit − Operating Expenses
Quiz
Gross profit: Rp 55M. Operating expenses: rent Rp 15M, salaries Rp 20M, software Rp 2M. What's net profit?
Answer: Rp 18M
Rp 55M − (Rp 15M + Rp 20M + Rp 2M) = Rp 55M − Rp 37M = Rp 18M net profit. That's what the business actually earned after all costs.
Continue learning
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lemondrop handles invoices, expenses, and reports — in IDR.