Reviewing Profit and Loss Statements for Self Employed Borrowers
Profit and loss statements summarise a business trading position over a specific period. Reading them carefully supports accurate self employed income assessments, especially where interim financials are being used.
Understanding the structure of a P&L
A P&L shows revenue at the top, cost of goods sold or direct expenses, gross profit, operating expenses, and net profit before and sometimes after tax. The statement should cover a clearly defined period and tie back to the general ledger or accounting system it was exported from.
Cross checking against the tax return
Where a P&L is being used for a historical financial year, the net profit figure should align with the corresponding tax return. Any variance needs to be explained and documented. The most common source of variation is accounting versus tax differences such as depreciation treatment.
Using interim P&L statements to support an uplift
Some lenders accept interim P&L statements to support an uplift on prior year financials, usually accompanied by an accountant sign off or BAS data. Read the statement carefully to confirm it covers a complete and recent period and that it has been prepared using the same accounting policies as the prior year return.
Key takeaways
- ✓Confirm the P&L period and the accounting basis used
- ✓Cross check historical P&L net profit to the tax return
- ✓Understand lender requirements for interim P&L acceptance
- ✓Flag any accounting policy changes between periods
How QualifyMate helps
QualifyMate reads company financial statements as part of the self employed assessment workflow, surfacing the figures alongside the matching tax returns so brokers can present a consistent view of trading performance.
Key terms
Related guides
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How to review Australian Notices of Assessment for home loan applications. What the document confirms and how to spot outstanding ATO debts.
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