Your sales are growing, but is your profit keeping up? The income statement helps answer that question. It brings together income and expenses for a period to show what the business has actually earned.
Also known as a profit and loss account, or P&L, it measures income, expenses and the resulting profit or loss over a period. In French-speaking Switzerland, you may see it called the compte de résultat or compte de pertes et profits (PP).
At a glance
- The income statement, also called the profit and loss account, reports income and expenses for a financial year.
- Income minus expenses gives the result: a profit if positive, a loss if negative.
- Distinguish operating profit, profit before tax and net profit.
- Profit is not a bank balance: payment dates and investment spending follow a different logic.
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What does an income statement tell you?
The balance sheet shows the financial position at a particular date. The income statement explains activity over a period, usually a financial year. It shows whether sales cover purchases, wages, rent and other expenses.
Under accrual accounting, work performed in December belongs to that financial year even if the customer pays in January. An expense can likewise be recognised before it is paid.
Talking only about money “earned” or “spent” would therefore be imprecise. We are looking at income and expenses, not just movements in the bank account. Our balance sheet vs income statement comparison shows how the two statements connect.
A worked income statement example
From revenue to net profit
This fictional annual income statement is in CHF, excluding recoverable VAT. It highlights the main levels of profit for teaching purposes. It does not replace the full statutory structure or any additional headings required by the company’s transactions.
| Annual item | Amount in CHF |
|---|---|
| Net sales | 300’000 |
| Cost of goods sold | −90’000 |
| Gross profit | 210’000 |
| Personnel expenses | −120’000 |
| Other operating expenses | −45’000 |
| EBITDA | 45’000 |
| Depreciation | −10’000 |
| EBIT: operating profit | 35’000 |
| Net finance costs | −3’000 |
| Profit before tax | 32’000 |
| Corporate income tax, illustrative assumption | −4’000 |
| Net profit | 28’000 |
The gross profit margin is 210,000 ÷ 300,000 = 70% of sales. Net profit, however, is only 28,000 ÷ 300,000 = 9.3% of sales after rounding. This gap explains why a strong gross margin alone does not establish overall profitability.
The CHF 4,000 tax charge is a fictional figure, not a Swiss tax rate. Other income, non-operating items and any specific adjustments must be included where applicable.
Understanding the main levels of profit
Revenue and gross profit
Business revenue represents net sales. Gross profit in francs is the difference between those sales and the cost of goods sold, or the defined cost base used for the activity. State the cost base clearly before comparing businesses or periods.
EBITDA and EBIT
EBITDA means earnings before interest, tax, depreciation and amortisation, within the definition used. EBIT is earnings before interest and tax, after depreciation and amortisation. Neither is a measure of cash available, and both should be reconciled to the accounts.
In our example, with no other items, EBITDA is CHF 45,000 and EBIT is CHF 35,000. A capital-intensive business can report satisfactory EBITDA while still needing funds to replace equipment.
Profit before tax and net profit
Profit before tax already includes finance costs and other relevant items. It is therefore not the same as operating profit. Net profit is calculated after all expenses, including the company’s income tax charge.
How can you use the statement to make decisions?
Compare periods on a consistent basis. Higher wages may reflect hiring ahead of future sales. A lower margin may result from purchase prices, discounts or a change in the products sold.
Look for a practical explanation for every significant movement. Then compare the result with your budget (in French) and business indicators. Industry comparisons are useful only when accounting methods and business models are sufficiently similar.
Finally, review your cash flow (in French). Repaying loan principal uses cash without being an expense; depreciation is an expense without a payment when it is recorded.
Track profitability throughout the year
Your income statement is most useful when it supports ongoing business management, not just the annual closing. Regularly comparing income and expenses helps you spot differences, understand pressure on margins and prepare decisions.
With our accounting support, you receive up-to-date accounts and explanations suited to your Swiss business. Discuss your results, adjust your priorities and plan ahead with a clearer view of the figures.
Frequently asked questions
Are an income statement and a profit and loss account the same thing?
Yes. Both describe the statement of income and expenses for a period. In French-speaking Swiss businesses, compte PP is also common: PP stands for pertes et profits.
Does a profit guarantee healthy cash flow?
No. Late-paying customers, large inventories and investment spending can tie up cash even when the business is profitable.
Should I wait until the year-end to review it?
No. An interim income statement with appropriate accruals helps you monitor margins and address differences during the year.
Sources and references
Romain Prieur is a Swiss-qualified accountant and founder of Entreprendre.ch. With more than ten years of experience in audit and business advisory in Switzerland, he advises entrepreneurs on company formation, accounting and taxation.
How is a Swiss income statement presented?
Article 959b of the Swiss Code of Obligations allows presentation by nature of expense or by function. For a small business, presentation by nature is often easier to read: expenses are grouped according to what they represent.
Typical items include net sales, changes in inventories of finished goods and unbilled services, materials, personnel expenses and other operating expenses. Depreciation and relevant valuation adjustments, financial income and expenses, non-operating items, extraordinary, non-recurring or prior-period items, and direct taxes follow.
How an item is classified depends on its substance and the accounting framework. Selling an old vehicle is not automatically a non-operating transaction. Correcting an error is not, by definition, an extraordinary event: consider the period and the nature of the item.