What a P&L tells you that Amazon metrics cannot
Amazon dashboards can tell you about sales, advertising and marketplace performance. They cannot see every cost paid elsewhere in your business.
Supplier payments, freight, wages, insurance, software, accountants, office costs and many other expenses may never appear in your Amazon metrics. A P&L brings the income and costs from across the business into one place, so you can see the final profit the whole business actually made.
Money the business earned from Amazon and any other genuine trading activity.
Money spent earning that income and keeping the wider business running.
What remains when all included business costs are deducted from income.
Once the report is complete, the P&L becomes the final source of truth for how the business performed financially during that period. It goes beyond a sales figure, an Amazon dashboard and the balance currently sitting in the bank.
The bank balance is not the same as profit. A loan can put cash into the account without creating a sale. Moving money between two accounts changes both balances without earning or spending anything. The P&L separates financial performance from those other movements.
How to create a P&L in eight simple steps
You do not need to understand accounting before you start. The process is simply deciding which money belongs to the business, arranging it into sensible groups and adding those groups together.
- Choose the period. Use the financial year ending on your year-end date if known; otherwise use the last complete calendar year.
- Get the main statement. Use the statement for your main business bank account covering those exact dates.
- Add other business lines. Bring in every relevant transaction from another account or card used for the business.
- Create one working list. Record the date, description, money in and money out for each statement line.
- Decide what belongs in the P&L. Include genuine business income and costs; leave out movements that do not affect profit.
- Categorise the included lines. Give similar transactions the same clear category.
- Generate the totals. Add the categories together to calculate income, costs and final profit or loss.
- Check the result. Review unusual totals and make sure no relevant line is missing or included twice.
The rest of this guide explains each step in plain English. If a financial term appears, we will explain what it means before asking you to use it.
Start with one complete year
A reporting period is simply the exact start and end date covered by the P&L. For your first report, use the last complete calendar year or your business's year-end dates if you know them.
Use your year-end date if you know it and select the twelve months ending on that date. For example, a 31 March year end normally means using transactions from 1 April to 31 March. If you do not know the date, simply use the last complete calendar year: 1 January to 31 December of the previous year.
Use the same dates for every statement line you include. Mixing a full year of income with only ten months of costs will make the profit look better than it really was.
Gather the transactions from your bank statement
This guide refers to your main business bank account simply to keep the wording easy to follow. Your P&L should still include every relevant income or cost from any other account or card used for the business.
Get the statement covering the reporting period and work through it from beginning to end. For each line, record the date, the bank's description and the amount paid in or out. You can do this in a spreadsheet, on paper or in any bookkeeping system that lets you keep a list of transactions.
If you used another account or card for a business purchase or received business income elsewhere, add those relevant statement lines to the same working list. You do not need to make the guide more complicated by treating every account separately; you simply need to make sure no genuine business income or cost is missing.
Why we categorise P&L transactions
A bank statement is arranged by date. That is useful for seeing when money moved, but it does not tell you how much the business spent on stock, advertising, software or any other type of cost.
Categories put similar transactions together. Every amount earned from normal trading can be grouped under the same income heading. Payments for software can be grouped together, as can advertising, professional help and stock. Adding each group gives the P&L its useful totals.
Categorising also makes the report repeatable. If the same kind of payment uses the same category each time, you can compare one year or month with another and immediately see what changed.
There are two decisions for every statement line: first, whether it belongs in the P&L at all; second, which category describes it. Leaving an irrelevant line out is just as important as including a genuine business transaction.
How to categorise each included transaction
Read the bank description and ask what the money was actually for. Then use the most specific suitable category.
| Category | What it means | Example statement line |
|---|---|---|
| Revenue/Sales | Income earned through the normal trading activity of the business. | An Amazon payout or income from another sales channel. |
| Cost of Goods Sold (COGS) | The direct cost of the products sold, often including stock and related product costs. | A payment to a product supplier or a direct freight cost. |
| Marketing and Advertising | Money spent promoting products or the business. | An advertising-platform or marketing-agency payment. |
| Software and Technology Expenses | Software subscriptions and technology used to operate the business. | A monthly software subscription. |
| Professional Services | Accountants, solicitors, consultants and other external specialists. | A payment to an accountant or solicitor. |
| Salaries and Wages | Pay and other employment costs for people working in the business. | A payroll payment. |
| Insurance | Business insurance policies. | A product-liability or business-cover premium. |
| Office Supplies and Expenses | Office materials and smaller office-related costs. | Stationery or printer supplies. |
| Operating Expenses | A genuine day-to-day running cost that does not fit a more specific category. | A general operational service payment. |
| Interest Expense | The interest charged on business borrowing, not the amount borrowed or repaid. | The interest part of a loan payment. |
| Other Income | Genuine income that did not come from the business's normal sales. | Bank interest or other non-trading income paid into the account. |
| Sundry Expenses | A small, genuine business cost that has no sensible specific category. | An unusual minor expense; use this category sparingly. |
If a payment could fit more than one category, choose the category you can apply consistently. If you are unsure, describe the payment to your preferred AI and ask which of the available categories fits best. What matters most is handling similar transactions in the same way each time.
What should be excluded from the P&L?
Not every statement line represents income or a business cost. When a line does not affect profit, leave it without a P&L category so it is excluded from the P&L and does not change the business's profit or loss.
- Transfers between your own accounts. Money moved location, but the business did not earn or spend it.
- Loan money received. The business must repay it, so it is not Revenue/Sales.
- Loan principal repaid. The repayment reduces what is owed; only the interest may be an Interest Expense.
- Personal or director transactions. These may need a drawings or director's-loan treatment rather than a P&L category.
Putting an own-account transfer or loan into Sundry Expenses does not make the report complete; it makes the reported profit wrong. Correct exclusion is part of producing a correct P&L.
Generate and check the P&L report
Once every included line has a category, create a Total line beneath each category and add together all the transactions in that group. Then bring those category totals into one P&L, with income at the top, costs beneath it and final profit or loss at the bottom.
Gross margin is what remains after the direct product costs have been deducted from income. Net income is the final profit after the wider costs of running the business have also been deducted. If the final number is below zero, the business made a loss for that period.
You can now see your business's exact profit for the period you selected—or the exact loss if the number is below zero. After working through every income and cost, this is the figure that really matters: what the whole business actually made after everything.
Before accepting the result, perform a simple check:
- Make sure the start and end dates match the intended financial year.
- Check that no relevant lines from another account or card are missing.
- Look for duplicated statement lines.
- Review any included line that still has no category.
- Check that transfers, loans and personal movements were not included accidentally.
- Open unusually large categories and make sure the underlying lines make sense.
Repeat the P&L every few months
Complete the full-year report first so you understand the whole process and have a useful report for year end. After that, repeat the same process every two or three months using the same categories.
A P&L every few months gives you an earlier warning when costs rise or profit falls. Compare the latest period with the previous one, then open the categories that changed. You may discover a growing subscription cost, a larger stock bill or a genuine investment that explains the movement.
This creates a useful rhythm without turning the report into a constant job. Each time, you get a fresh view of what the business actually made during that period.
Why preparing the P&L helps at year end
At the end of the business's financial year, your accountant will produce a profit and loss statement as part of your year-end accounts. It shows the business's income, running costs and final profit or loss for the accounting period.
GOV.UK's annual accounts guidance explains that a limited company's statutory accounts include a profit and loss account. This sits alongside the balance sheet and the other information required for the completed accounts.
If you have already worked through the statement lines, decided what belongs, used consistent categories and checked the totals, your accountant does not have to begin with a year of unexplained bank transactions. They have a prepared report and a clear trail back to the source lines.
This does not replace the accountant. They still review the work and make professional adjustments. For example, they may adjust for stock still held at the year end, bills that belong to the year but were paid later, equipment whose cost is spread over time, VAT, tax and items that belong on the balance sheet rather than the P&L.
Preparing the report yourself helps in two ways: it gives the accountant a much better starting point, and it means you understand the figures they are reviewing. Whether you use a general accountant, an Amazon accountant, an Amazon seller accountant or an Amazon FBA accountant, clear records make the year-end conversation more useful.
Frequently asked questions
What period should my first P&L cover?
Use the business's year-end date if you know it and cover the twelve months ending on that date. Otherwise, use the last complete calendar year from 1 January to 31 December.
Can I create a P&L from one bank account?
Yes. Use your main business account as the starting point. If business income or costs also passed through another account or card, add those relevant lines so the report is complete.
Why would I leave a bank transaction out?
A P&L includes income and costs that affect profit. Transfers between your own accounts, loan principal and some personal, director, asset or tax movements do not automatically belong in it. Including them can make the profit wrong.
What if I do not know which category to use?
Read the bank description and choose the most specific category that describes the payment. If you are still unsure, describe it to your preferred AI and ask which of the available categories fits best.
Does preparing my own P&L replace my accountant?
No. Your report organises the transactions and helps you understand the result. Your accountant reviews the work, makes the required year-end adjustments and produces the formal accounts.
Conclusion: understand how the whole business performed
Producing a P&L gives you the clearest view of how your business is performing financially. It brings together income and costs from beyond Amazon, removes movements that do not affect profit and shows the final result for one complete period.
Begin with a full financial year, use your main bank statement, add any relevant lines from elsewhere, decide carefully what belongs, categorise consistently and check the final totals. Once that annual report makes sense, repeat it every few months to keep that visibility.
Good Amazon seller accounting is not about producing more numbers. It is about having one report that clearly shows whether the whole business made a profit or a loss.
Achieve this more easily with Osellpa
Osellpa's Profit & Loss Statement tool lets you bring in bank statement data, categorise relevant lines using clear P&L categories, leave out transactions that do not belong and generate the report for the dates you choose.
Once the P&L is complete, Osellpa's Year End Preparation tool helps organise the other information your accountant needs and gives them limited access to review the prepared data.
