A profit and loss statement lists what you earned, what it cost you and what is left. In QuickBooks Online it runs Income, Cost of Goods Sold, Gross Profit, Expenses, Net Operating Income, Other Income and Expenses, then Net Income. How to read a profit and loss statement in QuickBooks, in four lines: income against last year, gross margin percentage, the three biggest expenses, and net income. Then check the basis under the report title, because the same month can show a profit on accrual and a loss on cash. If you own several companies, each file gives you one, and adding them together is not a group P&L.
Where the report is and how QuickBooks lays it out
In QuickBooks Online the report is under Reports, then Profit and Loss. Two options are worth switching on every time: a comparison column for the same period last year, and the percent of income column, which restates every line as a share of revenue. The cash or accrual toggle is on the same bar, and the default for every report is set at Settings, Account and settings, Advanced, Accounting.
Income is the total of your sales for the period. On accrual basis it counts an invoice on the day it is dated, not the day the customer pays.
Cost of goods sold is what it cost to deliver those sales: materials, the wages of the people who do the work, subcontractors. In a service business the bookkeeper may not have set it up at all, which matters below.
Gross profit is income less cost of goods sold. Divided by income, it is the gross margin percentage, the most useful number on the page.
Expenses, in QuickBooks' labeling, are the costs of keeping the doors open whether you sold anything or not: office wages, rent, insurance, vehicles, advertising.
Net operating income is gross profit less expenses. It is what the business earned from doing its work.
Other income and other expenses sit below that line and hold what is not part of the work: loan interest, interest earned, a gain on selling a truck, a refund.
Net income is the last line. It comes after Other, and it is the figure most owners look at and the easiest one to be misled by.
The four lines to read first on a QuickBooks profit and loss statement
Most guides walk you down the report from the top. We would not. Four lines answer nearly every question an owner has on a Monday.
Below is February's P&L for a 32-person HVAC company, accrual basis, with last February beside it.
| Line | February 2026 | February 2025 |
|---|---|---|
| Income | $412,600 | $371,900 |
| Cost of goods sold | $254,200 | $224,100 |
| Gross profit | $158,400 (38.4%) | $147,800 (39.7%) |
| Expenses | $94,100 | $86,300 |
| Net operating income | $64,300 | $61,500 |
| Other expense (loan interest) | $2,400 | $2,700 |
| Net income | $61,900 | $58,800 |
Line one is income against the same month last year: $412,600 against $371,900, up about 11 percent. That tells you whether the business is bigger or just busier.
Line two is gross margin as a percentage: 38.4 percent this year, 39.7 percent last. Revenue grew 11 percent and gross profit grew 7 percent, so each dollar of sales is earning a little less than it did. In an HVAC business that usually means parts prices moved before the price list did, or technicians spent more hours per job. The percentage catches this. The dollar figure hides it.
Line three is the three biggest expense lines: office payroll at $38,400, vehicle costs at $12,700 and advertising at $11,300, together two thirds of all expenses. If one of them moved by more than a few thousand dollars against last year, that is the question for the bookkeeper.
Line four is net income, $61,900, or 15 percent of income. It answers "did we make money", and it is the least reliable of the four.
What the QuickBooks layout hides
A P&L can be tidy and still misleading, because it shows what the bookkeeper booked, in the account the bookkeeper chose.
Cost of goods sold that was never set up. If the technicians' wages sit in Expenses with the office staff, gross margin reads close to 100 percent, and the number that should tell you about pricing tells you nothing.
Owner pay booked as a distribution. In an S corporation the owner's salary runs through payroll and shows in Expenses. The rest is a distribution, which is equity on the balance sheet and never appears on the P&L. The HVAC owner above takes $14,000 a month that way, so the business is really earning nearer $47,900 for someone who did not own it.
Loan interest in Other Expense. It belongs there, but an owner who reads only net operating income never sees it.
Uncategorized Expense and Ask My Accountant. These are holding accounts for transactions the bookkeeper could not place. A few hundred dollars at month end is normal. A balance of $23,000 means a chunk of your P&L is in the wrong section, and possibly the wrong month.
A large Other Income line. An insurance payout, an employee retention credit refund or a gain on selling a vehicle lands here and lifts net income once. It is real money, and it should not be in any margin you compare with last year.
Profit is not the bank, and the header tells you which profit
The P&L records income when invoiced and costs when incurred. The bank moves when money lands or leaves. Loan principal, owner draws, the new truck and the sales tax you collected for the state never touch the P&L at all, so a month with $61,900 of net income can end with less cash than it started and nothing is wrong with the books. The trace from one number to the other is in why net income doesn't match your bank balance.
The other check is the basis. Under the report title QuickBooks prints "Accrual basis" or "Cash basis". On cash basis the February income above would be only what customers actually paid in February, which for a company that invoices on completion and waits 30 days is a different number. A QuickBooks Community thread from October 2022 has an owner who files on cash asking why the accrual report "overstates the revenue". It does not; it counts the work done rather than the checks received. The full comparison is in cash vs accrual in QuickBooks, which one you are looking at.
Three companies, three P&Ls
Everything above assumes one company file. The owner we usually meet has three: an HVAC company, a plumbing company bought two years ago, and an LLC that owns the shop and rents it to the other two. Each has its own P&L. None of them describes the business.
Adding the three together in a spreadsheet gets a total, but the wrong one. Suppose the property LLC charges $8,500 a month of rent to each operating company. That is $17,000 of income in the LLC's file and $17,000 of expense across the other two. Add the three and combined income is overstated by $17,000 and combined expense by the same. Net income is unchanged, which is why nobody notices, but the margin percentages are wrong and so is the answer to "how big are we". Removing those entries is what accountants call elimination, and intercompany transactions explained covers how they arise.
The question a multi-company owner actually has is different anyway: which company made money this month, and which one is being carried. That needs the four lines per company, side by side, on the same basis, for the same period. Running several files without a finance person is covered in managing the finances of multiple businesses.
Navigator reads each QuickBooks Online file read-only and shows margin and net income per company and combined, refreshed daily, with the P&L line behind any figure one click away, on the base plan. The combined view with the rent and fees between the companies removed is a Pro feature. It changes nothing in the books, and the bookkeeper's close is still the close.
The ten-minute monthly read
The routine is the same four lines, in the same order, for every company, then for the group. Income against last year. Gross margin percentage against last year. The three biggest expense lines, each against last year. Net income, with a glance at Other and at any Uncategorized balance. Then the header, to confirm the basis matches last month's. Ten minutes per company once the close is in.
There are things this read cannot do. It cannot tell you whether you will make payroll in six weeks, because it looks backward; that is a cash forecast's job. It cannot tell you whether a particular job made money unless job costing is set up, which in most files it is not, and it cannot catch a bookkeeper who books things in the wrong month, because the P&L takes the dates it is given.
Questions owners ask
How do I run a profit and loss report in QuickBooks Online?
Open Reports from the left menu and choose Profit and Loss. Set the period at the top, pick cash or accrual under Accounting method, and use the comparison option to add a column for the same period last year. Add the percent of income column and every line shows as a share of revenue, which is the fastest way to read margin.
What is the difference between net operating income and net income in QuickBooks?
Net operating income is what the business earned from doing its work: income less cost of goods sold less expenses. Net income comes after the Other Income and Other Expenses section, which holds things like loan interest, interest earned, gains on selling a vehicle and refunds. When the two differ by a lot, look at what is sitting in Other.
Why does my P&L show a profit when my bank account is empty?
Because the P&L counts an invoice as income the day you send it and never sees loan principal, your own draws, equipment purchases or sales tax you are holding for the state. A business can earn $61,900 in a month and end the month with less cash than it started. Both figures are true; they measure different things.
Should I read my P&L on cash or accrual basis?
Accrual, for running the business, because it shows the work you have done and the bills you owe whether or not money has moved. Most businesses this size file taxes on cash, so your CPA will look at the other view. The mistake is reading one without knowing which it is.
Can I see a profit and loss for all my companies at once in QuickBooks?
Not in a standard QuickBooks Online plan. Each company file has its own P&L, and combining them means exporting each to a spreadsheet, lining up the accounts and removing the transactions between the companies. Intuit Enterprise Suite and third-party reporting tools do the roll-up; without one, someone does it by hand each month.
Related
Once the four lines are a habit, the next question is what a good gross margin looks like for your trade, which is the subject of what is a good profit margin for a small business. The difference between the margins on the page is set out in gross margin vs net margin vs operating margin. And if the profit is there but the cash is not, start with why net income doesn't match your bank balance.
If you would rather have the four lines read for you each morning, per company and combined, the trial connects to QuickBooks Online read-only in about fifteen minutes and needs no card: navigatorhq.ai.
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Published . Last updated . Reviewed by a CFO on the Navigator team.