The Income Statement — the profit and loss — answers one question: over this period, did you make money, and where did it go? It reads top to bottom, each line derived from the one above.
Gross Sales
Everything you sold, before any deduction. Not what you were paid — what you sold.
Refunds
What you gave back. Shown as its own line rather than quietly subtracted from Gross Sales, because a rising refund rate against steady sales is one of the earliest signals that something is wrong with a product or a listing. Netted away, you would never see it.
Net Revenue
Gross Sales minus Refunds. This is your real top line, and the number worth comparing month to month.
Cost of Goods Sold
What the things you sold cost you to buy or make. Only the goods that actually sold in this period — inventory you are still holding is an asset on your Balance Sheet, not an expense yet.
Gross Profit
Net Revenue minus COGS. The margin on the goods themselves, before the cost of running a business.
If this number is thin, no amount of cutting overhead saves you: the problem is pricing or sourcing, and this is the line that says so.
Operating Expenses
Everything else it took to trade — marketplace fees, advertising, shipping supplies, software, contractors, overhead.
Marketplace fees usually belong here, and they are usually larger than sellers expect. Seeing them as their own expense line rather than buried inside a net payout figure is often the first time the real cost of a channel is visible.
Net Profit
What is left. The bottom line.
What to actually do with it
Three habits get most of the value out of this report:
- Compare periods, not absolutes. One month's Net Profit means little alone. The same month against last month, or against last year, means a great deal.
- Watch Gross Profit percentage, not just its dollars. Rising sales with a falling margin is a business getting busier and poorer at the same time.
- Filter by channel. A channel can carry healthy sales and still lose money once its own fees are counted against it. Per-channel is where that shows up; combined, it hides.
Why it will not tell you your bank balance
The Income Statement covers a period of trading. It says nothing about money you are owed, money you owe, or what is in the bank right now — that is the Balance Sheet, and a profitable month can still be a month your bank balance fell. Both reports are needed, and neither substitutes for the other.