Profit and loss account or also known as the income statement is one of the major financial statements (others include: balance sheet, the cash flow statement, the statement of stockholder’s equity).

Profit and loss account (Rachunek Zysków i Strat) shows the profitability (rentowność) of a company in a given period of time.
There are certain elements in the P&L which refer to revenues or gains from a certain type of activity or expenses and losses:

Revenues (przychody) and Gains (zyski)

• From operating activity (core activity)
• Investing activity
• Financial activity

Expenses (wydatki) and losses (straty)

There are two formats to prepare the P&L:

1. Single-step  (format uproszczony) – which uses this formula to arrive at net income: Net income = (Revenues + Gains) – (Expenses and Losses)
2. Multiple-step (wariant kalkulacyjny)  – which segregates the operating revenues and operating expenses from the non-operating revenues and expenses. It shows the gross profit (net sales minus the cost of goods sold).

Take this short quiz to check what you already know:

1. Amounts earned by a company in its main operating activities are:

a. Revenues 
​b.  Gains

2. A company sells a car that is no longer used in its business. The amount received is more than the book value (wartość księgowa) of the asset. The company will report a(an):  
a. Expense
b. Gain
c. Loss
d. Revenue 

3. Is a company’s Interest (odsetki) Expense:
a. an operating expense or
b. a non-operating expense?

4. Net Sales minus the Cost of Goods Sold (COGS) equals:
a. Gross profit
b. Net income

5. Gross profit minus Operating expenses  is also known as:
a. Net income
b. Operating income

Now check your answers below.

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Key: 1. a/ 2 b /  3 b/  4 a/ 5 b

Glossary:
Profit and loss account (P&L) or Income Statement – Rachunek Zysków I Strat
Profitability – rentowność
Revenues – przychody
Gains – zyski finansowe
Expenses – wydatki
Losses – straty
Operating activity – działalność operacyjna
Investing activity – działalność inwestycyjna
Financial activity – działalność finansowa
Single-step – format uproszczony
Multiple-step – format kalkulacyjny
Net income – przychody netto
Cost of goods sold – koszt sprzedanych towarów
Book value – wartość księgowa
Interest – odsetki