What is an income statement?
An income statement (often called profit and loss statement or P&L) is the scorecard for business. It shows the revenue, expenses and profit or loss. It shows these things for some period of time, usually a month or a year. An income statement is usually titled “Income Statement for X Business for the period January 1 to December 31, 20XX.
An income statement (often called profit and loss statement or P & L) is the score card for business. It shows the revenue, expenses and profit or loss. It shows these things for some period of time, usually a month or a year. An income statement is usually titled: “Income Statement for X Business for the period January 1 to December 31, 19XX.” A very simple form of income statement could have just a few lines: Total revenue, total expense, profit before tax, taxes, and net profit. A more complex statement could show revenue by category (from store sales, from mail order sales, from leasing, etc.) and expenses by type (rent, utilities, wages, etc.). For more information on this topic, contact your local SBDC.
Income statements are an example of an accounting document that is designed to provide a quick snapshot of the financial condition of a given company. Sometimes known as a profit and loss statement, the document provides data on the profits generated by the business within a given time frame, as well as making note of any expenses or losses that occur during the same period. Just about all businesses generate an income statement on an annual basis as part of the preparation for tax season. In addition, many companies also prepare the statement on a quarterly basis for purposes of internal monitoring. The data that is used to compile the income statement is taken from the various ledgers and other documentation that relate to any revenues and expenses generated during the period under consideration. In this sense, the income statement functions to some degree in the same manner as a balance sheet, in that it accounts for the influx of money into the organization as well as making note o
When you study a potential investment candidate you should look at its income statement. The latter represents the amount of money the company has earned or lost during a particular time period. The income statement is usually included in the annual report. Additionally, a company’s income statement includes the commonly stated bottomline.
An income statement shows what has happened in a business over a specific period of time, usually a year. It is similar to a movie which illustrates changes in the cost and returns of a business over time, compared with the balance sheet, which just presents a snapshot of the firm on one specific day. As we will see later, the income statement is the flow statement that links two balance sheets.
