In plain English
Read it in three blocks: revenue, cost of goods sold, and operating expenses. Gross profit sits between the first two; net profit is what survives the third.
A P&L covers a stretch of time, a month, a quarter, a year. That is what separates it from a balance sheet.
Example
Revenue $18,000 − COGS $10,800 = gross profit $7,200 − operating expenses $5,500 = net profit $1,700.
Why it matters
It is the first document a bank, supplier credit department or buyer of your business asks for.
COMMON MISTAKEOnly producing one at tax time. A P&L you see monthly is a management tool; one you see annually is a receipt.