income statement

Examples of income statement in the following topics:

• Defining the Income Statement

  • The income statements reports the revenues, expenses, and overall net profit or loss over a given reporting period.
  • After all of the items have been added or subtracted accordingly from the starting revenue, the income statement will display the overall net income or net loss.
  • Understanding an income statement is best accomplished by analyzing one.
  • The income statement starts with revenues, minuses costs and expenses, and results in a net gain or loss.
  • Define the income statement in the broader context of financial accounting

• Sample Income Statement

  • The income statement displays the revenues recognized for a specified period and the costs and expenses charged against these revenues.
  • The income statement (profit and loss statement), is a company's financial statement indicating how revenue becomes net income.
  • An income statement differs from a balance sheet because it represents a period of time, not a single moment.
  • Preparing the income statement involves two possible methods.
  • However, income statements have several limitations:

• Financial Statements Across Periods

  • Companies prepare three financial statements according to GAAP rules: the income statement, the balance sheet, and the cash flow statement.
  • These three financial statements are:
  • The income statement (also called the "profit and loss statement"): This gives an account of what the company sold and spent in the year.
  • Sales (also called "revenues"), or what the company sold in products and services, less any expenses (expenses are divided into a number of categories) and less taxes, gives the company's income.
  • The income statement summarizes all this type of activity for the year.

• Revenues

  • In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers.
  • Revenue may refer to business income in general or the amount, in a monetary unit, received during a period of time.
  • Revenue is a crucial part of financial statement analysis, and the income statement in particular.
  • Consistent revenue growth, as well as net income growth, is considered essential for a company's publicly traded stock to be attractive to investors.
  • In addition, companies use revenue to determine bad debt expense using the income statement method.

• Comparisons Within an Industry

  • Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a company's financial statements to make better economic decisions.
  • These statements include the income statement, balance sheet, statement of cash flows, and a statement of retained earnings.
  • Financial statements can reveal much more information when comparisons are made with previous statements, rather than when considered individually.
  • Horizontal analysis compares financial data, such as an income statements, over a period of several quarters or years.
  • For example, on an income statement each line item will be listed as a percentage of gross sales.

• Financial Accounting

  • These three statements are the balance sheet, the income statement, and the statement of cash flows.
  • As opposed to something that balances, the income statement is more of a one directional document.
  • An income statement calculates whether or not a business is accomplishing this.
  • Your overall net income for the month is $1,500.
  • This process is what an income statement does.

• Net Income

  • Net income in accounting is an entity's income minus expenses for an accounting period.
  • Net income in accounting is an entity's income minus expenses for an accounting period.
  • Profit is a term that means different things to different people, and different line items in a financial statement may carry the term "profit," such as gross profit and profit before tax.
  • Often, the term income is substituted for net income, yet this is not preferred due to the possible ambiguity.
  • Net income is informally called the "bottom line," because it is typically found on the last line of a company's income statement (a related term is "top line," meaning revenue, which forms the first line of the account statement).

• Sample Evaluation

  • Most of the ratios discussed can be calculated using information found in the three main financial statements.
  • Using the information above, we can compile the balance sheet and the income statement.

• General and Administrative Expenses (G&A)

  • In reporting expenses on an income statement, there are various expenses incurred that are not directly related to production.
  • They create a net income of 2% on an annual basis.
  • As a result, the produce a net income at almost 30% of revenue.
  • This image shows a basic income statement, including a line item for SG&A.

• Direct and Indirect Measurement

  • Cash flow statements can be measured via the direct method and the indirect method to determine overall liquidity.
  • In layman's terms, the statement of cash flows identifies what resources a business can use relatively quickly.
  • The structure of the indirect method is also somewhat different, as it starts with the overall net income amount for the reporting period, where operational, investing, and financial changes in valuations are then applied to this amount.
  • When you apply each of these items to the net income of a given period, you will derive a net increase or decrease in overall cash flow as a result of investments, financing, and operations for an organization.
  • This is a simple direct monthly cash flow statement from a small business.