An account showing a company's earnings and expenses over a period, what it has done with its profits, how much is being paid out in dividends and how much is retained in the company. It shows the results of activities during a period, whereas the balance sheet shows the company's assets and liabilities at a point in time (balance date). At the end of the accounting period all income and expense accounts are closed and the balance transferred to the P & L account. After calculating profit and determining dividends, the balance of retained earnings is transferred to owners' equity in the balance sheet. The new year's income and expense account begins with a clean sheet, a zero balance. Abbrev. P & L.
