Understanding a Swiss income statement: structure and worked example

What does an income statement show?

An income statement records income and expenses over an accounting period, usually a financial year. The difference is the period’s profit or loss. In French-speaking Switzerland, you may hear compte de résultat or PP (pertes et profits); in English, profit and loss statement, or P&L.

It answers three different questions: how much activity the business generated, what that activity cost, and what remained after financing and tax. Sales are not profit. An expense does not always involve a payment in the same period: depreciation is a familiar example.

Income statement, balance sheet and cash flow

The balance sheet is a snapshot of assets, liabilities and equity at a date. The income statement explains performance over a period; its annual result also appears within equity.

A service delivered and invoiced in December may contribute to December revenue even if the customer pays in January. Conversely, a bank loan increases cash and debt without creating revenue. A cash flow statement explains movements in cash through operating, investing and financing activities. Read these statements together: profit is not the same as an increase in your bank balance.

The Swiss statutory structure

Article 959b of the Swiss Code of Obligations permits presentation by nature of expense or by function. A presentation by nature identifies at least the following items, separately and in the prescribed order:

1. Net revenue from sales of goods and services.
2. Changes in inventories of finished goods and work in progress, and in unbilled services.
3. Cost of materials.
4. Personnel expenses.
5. Other operating expenses.
6. Depreciation and impairment of fixed assets.
7. Financial expenses and financial income.
8. Non-operating expenses and income.
9. Extraordinary, non-recurring or prior-period expenses and income.
10. Direct taxes.
11. Profit or loss for the year.

The detail must fit the activity: a consulting company’s subcontracting costs do not tell the same story as a retailer’s purchases of goods. Include the previous year’s figures for comparison. If presenting expenses by function, disclose personnel expenses and depreciation and impairment of fixed assets separately in the notes to the annual accounts.

Worked example: a trading business

The figures below are illustrative, in CHF, excluding recoverable VAT. Cost of goods sold already reflects inventory movements. There is no financial income, non-operating result or exceptional item in this simplified example.

The business earns CHF 34,000 on CHF 600,000 of sales: a net margin of approximately 5.7%. The CHF 6,000 tax charge is an assumption for this example, not a promised cantonal tax rate. This table is not a complete set of annual accounts: it omits comparative figures, the balance sheet and notes.

Understand the different profit levels

Gross profit is sales less the cost of goods sold: CHF 360,000. It still has to cover staff, premises, administration and other costs.

EBITDA means earnings before interest, taxes, depreciation and amortisation. It is CHF 60,000 here. State how you calculate this management measure and explain any adjustments; it is neither gross profit nor cash flow.

Operating profit after depreciation is CHF 45,000. In this simplified example it corresponds to EBIT. Profit before tax is lower, at CHF 40,000, because it includes the financing expense. After direct taxes, net profit is CHF 34,000.

For the allocation of asset costs between periods, see depreciation in Swiss accounting.

How to analyse your P&L

Compare like with like: the same period in the previous year, the budget, and the same season where business is seasonal. A strong December should not be compared uncritically with a quiet January.

Break revenue down by activity, customer or product. Separate volume growth from price changes and discounts. Check whether a small number of customers account for most sales.

In the example, staff costs represent 35% of revenue. A rising ratio may reflect recruitment ahead of growth, more hours or lower productivity. The percentage alone does not explain the cause.

Identify unusual income and expenses without deleting them from the statutory accounts. Keep statutory performance and adjusted management indicators clearly separate. A business plan and financial forecast helps connect these findings to future staffing, pricing and cash needs.

Common mistakes and closing checks

Purchases are not always consumption. Goods still in inventory at year-end affect the calculation of cost of goods sold. Check quantities and valuation.

Invoice date is not the only test. A December expense invoiced in January may need an accrual. Review open invoices and services received before closing.

An investment is not automatically an immediate expense. An asset used over several years may need capitalisation and depreciation. Dividends, meanwhile, are an appropriation of profit following the relevant decision, not an operating expense.

Before relying on an interim P&L, establish whether stock movements, accruals, depreciation and tax have been booked. An unadjusted report can overstate or understate profitability. These checks belong in a disciplined year-end closing process and follow the Swiss accounting principles.

Frequently asked questions