How to make a simple monthly profit and loss statement for your online shop

Updated October 28, 2026 · SellerSheetKit Guides

Your marketplace dashboard shows sales. Your bank balance shows cash. Neither tells you whether the shop actually made money last month. A profit and loss statement (P&L, also called an income statement) does. It lines up what you sold against what it cost to make and sell it, one month at a time, so you can see your real profit and spot problems while they are still small.

This guide covers the P&L formula, which lines a small online shop needs, a worked monthly example, how to read gross and net margin, and a short month-end routine to keep it current.

The profit and loss formula

Net sales = Gross sales − Refunds and discounts

Gross profit = Net sales − Cost of goods sold (COGS)

Net profit = Gross profit − Operating expenses

That is the whole structure. Everything else is deciding which costs go on which line, and doing it the same way every month so the months can be compared.

The lines a small shop needs

Revenue

Gross sales — item prices you sold, by channel if you sell in more than one place.
Shipping charged to buyers — track it so you can compare it with what postage actually cost you.
Refunds and discounts — subtract these to get net sales. A returns log makes this line easy.

Sales tax a marketplace or your store collects and passes to the state is generally not your revenue. Keep it out of sales so it does not inflate your numbers.

Cost of goods sold

The direct cost of the items you sold: materials, packaging that ships with the product, and inbound freight for stock. If you are not sure how to calculate it, see our guide on how to calculate COGS.

Selling costs

Marketplace and payment fees — transaction, processing, listing, and fulfillment fees. Our guides to Etsy fees, Shopify margins, and Amazon FBA fees break these down.
Shipping and postage you paid.
Advertising — marketplace ads, social ads, promoted listings.

Operating expenses

Software subscriptions, equipment, supplies not tied to a specific product, photography, and anything else it takes to run the shop. Group them into a handful of categories rather than dozens; you want a readable page, not a ledger.

Worked example: one month for a small shop

Illustrative figures only; use the numbers from your own statements.

Line	Amount	% of net sales
Gross sales	$6,200
Refunds and discounts	−$200
Net sales	$6,000	100%
COGS	−$1,800	30%
Gross profit	$4,200	70%
Marketplace and payment fees	−$780	13%
Postage	−$540	9%
Advertising	−$450	7.5%
Software and other expenses	−$230	3.8%
Net profit	$2,200	36.7%

Gross margin is $4,200 ÷ $6,000 = 70%. Net margin is $2,200 ÷ $6,000 ≈ 36.7%. The gap between the two — about 33 points here — is what fees, postage, ads, and overhead take. Showing each line as a percentage of net sales is the fastest way to see which cost is growing.

How to read your P&L

Gross margin falling? Material or supplier costs went up, or you discounted more. Check unit costs and prices.
Fees rising as a percentage? Your channel mix may have shifted toward a more expensive channel, or fee rates changed.
Ads growing faster than sales? Compare ad spend to the extra sales it brought in, not to total sales.
Profit up but cash down? You may have bought inventory. Inventory is cash spent before it becomes COGS, which is why profit and bank balance rarely match month to month.

Compare each month with the previous month and, once you have a year of data, with the same month last year. Seasonal shops especially need the year-over-year view.

A 15-minute month-end routine

Download each channel's monthly statement or payment report.
Enter gross sales, refunds, and fees per channel.
Add COGS for units sold (unit cost × units sold, or the inventory-based formula).
Add postage, ads, and other expenses from your bank or card statements.
Check the margins against last month and write one line about anything unusual.
Use the net profit figure to update your quarterly tax set-aside.

Common P&L mistakes

Counting payouts as sales. Payouts are already net of fees and refunds. Record gross sales and the fees separately, or fees disappear from view.
Treating inventory purchases as a monthly expense. Stock becomes COGS when it sells, not when you buy it. Expensing it upfront makes buying months look terrible and selling months look too good.
Mixing personal and business spending. A separate account or card for the shop makes the expense lines far easier and more accurate.
Changing categories month to month. Pick categories once and keep them, or your comparisons stop meaning anything.

A P&L is a management tool for you. For tax filings, follow your tax professional's guidance on how income and expenses should be reported.

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SellerSheetKit is not affiliated with Etsy, Shopify, or Amazon. Fee figures are summarized from official sources on the date above and can change; verify against your seller account. Educational content only — not tax, legal, or accounting advice.