How to read your Profit & Loss in 30 seconds, what each line means, and the two traps that make the number lie.
Did I make money?
The 30-second answer
Open Reports → Profit & Loss, set the date range to the period you care about (this month / this quarter / this year), and look at Net Income at the bottom.
- Positive? Yes, you made money.
- Negative? You spent more than you earned.
If that's all you needed, you're done. The rest of this page explains what's behind that single number — useful when it surprises you.
What the line items mean
| Line | Plain English |
|---|---|
| Revenue | Money your customers paid you (or owe you, on accrual). |
| Cost of Goods Sold (COGS) | What it cost you to deliver the thing you sold. |
| Gross Profit | Revenue minus COGS. The margin on what you sold. |
| Operating Expenses | Everything else it takes to run the business — rent, software, salaries. |
| Operating Income | Gross Profit minus Operating Expenses. |
| Net Income | After interest + taxes + everything. The actual profit. |
A worked example: you sell consulting for $10,000 in January. You pay a subcontractor $4,000 for part of it, $1,200 in software, and $300 in coffee meetings. Revenue $10,000, COGS $4,000, Gross Profit $6,000, Operating Expenses $1,500, Net Income $4,500. You made money.
The two big traps
Trap 1: "I have money in the bank" ≠ "I made money"
The bank balance is cash. Net Income on accrual basis includes invoices you've sent that haven't been paid yet, and excludes deposits that aren't actually revenue (loans, owner contributions). If your P&L says you made money and your bank account is shrinking, the gap is usually unpaid invoices or money you took out of the business — not a bookkeeping error.
Trap 2: One month is not a trend
Profitable in March, unprofitable in April? That's business — it doesn't mean anything went wrong. Look at the trend over 3-6 months before reading anything into a single month.
When the number is wrong
If Net Income looks too good to be true or too bad:
- Suspiciously high — common cause: expenses sitting in the wrong account (e.g., owner draws miscategorized as a revenue offset).
- Suspiciously low — common cause: a big deposit got booked as Revenue when it was actually a loan or refund.
- Negative when you know you're profitable — usually uncategorized transactions. Run the month-end checklist.
For the column definitions and the SQL behind each line, see Yoke Ledger Reports.