> For the complete documentation index, see [llms.txt](https://help.modelreef.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.modelreef.io/help/financial-outputs-and-valuation/p-and-l-overview.md).

# P\&L Overview

This article explains how the **Profit and Loss (P\&L)** statement works in Model Reef.

You will learn:

* How the P\&L is generated from variables and timing rules.
* The structure of the P\&L in Model Reef.
* How the P\&L connects to the Balance Sheet, Cashflow Statement and Cash Waterfall.

The P\&L is an accrual only view of performance. Cash timing is handled separately by the timing engine.

***

## 1. How the P\&L is generated

The P\&L is not built with user formulas. It is generated automatically by the engine based on:

* Variable types (Revenue, COGS, Opex, Staff, Tax, Assets, Liabilities).
* Categories and subcategories assigned to variables.
* Accrual logic from the timing engine.

For each period, Model Reef follows these steps:

{% stepper %}
{% step %}

### Evaluate all variables

All defined variables are evaluated for the period.
{% endstep %}

{% step %}

### Calculate accrual values

The engine calculates each variable's accrual value for that period based on timing rules.
{% endstep %}

{% step %}

### Allocate to P\&L lines

Accrual values are allocated to P\&L lines according to variable type and category.
{% endstep %}

{% step %}

### Aggregate results

Values are aggregated by category, subcategory and branch.
{% endstep %}
{% endstepper %}

This means the P\&L always reconciles correctly with the Balance Sheet and Cashflow Statement.

***

## 2. Standard P\&L layout

The default P\&L layout in Model Reef follows this sequence:

{% stepper %}
{% step %}

### Revenue

* All Revenue variables at accrual timing.
* Broken down by category and branch where needed.
  {% endstep %}

{% step %}

### COGS (Cost of Goods Sold)

* All COGS variables.
* Typically direct costs of delivering revenue.
  {% endstep %}

{% step %}

### Gross Profit

* Gross Profit = Revenue minus COGS.
* Gross Margin can be viewed as a percentage of revenue.
  {% endstep %}

{% step %}

### Operating Expenses (Opex)

* Opex variables that are not classified as Staff.
* Grouped by category such as Marketing, Rent, Technology.
  {% endstep %}

{% step %}

### Staff Costs

* Staff variables shown separately from other Opex.
* Includes salaries, pension or super, payroll tax and other oncosts.
  {% endstep %}

{% step %}

### EBITDA

* EBITDA = Gross Profit minus Opex minus Staff.
  {% endstep %}

{% step %}

### Depreciation and Amortisation

* Non cash charges from Asset variables and any intangible asset logic.
  {% endstep %}

{% step %}

### EBIT

* EBIT = EBITDA minus Depreciation minus Amortisation.
  {% endstep %}

{% step %}

### Interest Expense

* From Liability variables based on loan balances.
  {% endstep %}

{% step %}

### EBT (Earnings Before Tax)

* EBT = EBIT minus Interest Expense.
  {% endstep %}

{% step %}

### Tax Expense

* Calculated via Tax variables using effective tax rates.
  {% endstep %}

{% step %}

### Net Profit After Tax (NPAT)

* NPAT = EBT minus Tax Expense.
* NPAT flows into retained earnings in the Balance Sheet.
  {% endstep %}
  {% endstepper %}

You can customise the display via categories and custom reports, but this is the core logic.

***

## 3. Branch and consolidation behaviour

The P\&L can be viewed at different structural levels:

* Branch level
  * Shows only variables in that branch and its children.
  * Useful for store, division, entity or project level performance.
* Parent branch and consolidated views
  * Show the sum of all enabled child branches.
  * Useful for group or total company performance.

Disabling a branch removes its contribution from consolidated P\&L but does not delete its data.

***

## 4. P\&L vs Cashflow and Cash Waterfall

The P\&L shows **when performance is recognised**. It does not show when cash moves.

Links to other statements:

* Balance Sheet
  * Timing differences between P\&L and cash appear as Accounts Receivable, Accounts Payable, Tax Payable and Interest Payable.
* Cashflow Statement
  * Cash movements are shown when they occur, not when accruals occur.
  * Operating cashflows, investing cashflows and financing cashflows derive from variable timing and type.
* Cash Waterfall
  * Uses P\&L lines down to EBITDA.
  * Then applies working capital, capex, debt, equity and dividends as cash items.

Understanding the P\&L structure makes it easier to interpret the waterfall and valuation outputs.

***

## 5. Period views and common size

You can view the P\&L in different ways:

* Periodicity: monthly, quarterly, annual or custom ranges.
* Common size: each line as a percentage of revenue.
* Scenario: different models representing Base, Downside, Upside, etc.
* Branch filters: specific entities or divisions.

These views do not change the underlying calculations. They just change how the same data is aggregated and displayed.

***

## Related articles

* [Store-Level P\&L Modelling](/use-cases/retail-single-and-multi-site/store-level-p-and-l-modelling.md)
* [Build a Debt Schedule & Covenants Model](/how-tos/investment-and-transactions/build-a-debt-schedule-and-covenants-model.md)
* [Cleaning Headers](/help/importing-and-data-inputs/cleaning-headers.md)
* [Vectorised Calculations](/syntax/formula-syntax/vectorised-calculations.md)