An income statement (also called a profit-and-loss statement) shows the profitability of a business over a specific period of time. It is one of the fundamental documents that make up a company’s financial reporting.
The income statement summarizes revenues and expenses resulting from operating and non-operating activities. It also shows the company’s net profit or loss.
Income statements are presented on either a cash or accrual basis. (The accrual basis version is most common.) It is important to understand which approach has been used before interpreting the income statement.
Owners, managers and financiers use income statements to compare results against the company’s plan for the current operating period and make adjustments to improve business performance.
More about income statements
The example below shows the core components that make up an income statement. Any assumptions made in preparing the income statement are explained in the notes to the financial statements.
- Operating expenses (selling, general & administrative expenses)
- Income statement
- Fixed costs
- Variable costs
- Selling expenses
- General expenses
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