Income Statement Definitions
by: NPSIS:JasonKlein |
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The income statement which is commonly referred to as a profit and loss statement summarizes an organization's revenues (sales) and expenses. The time frame that an income statement reflects should be displayed in its heading. An income statement measures profitability and recognizes revenues when they are realized or when the service is rendered.
Simply, the information found on an Income Statement is business revenue, expense, and profit / loss.
In short, revenue is the total income that a business receives. When summarized on an income statement the revenue is typically broken down into sub-categories or displayed on multiple lines in order to easily convey whether the income was derived from normal business operations or not.
Expense can be defined on an income statement as the outflow of money or value from the business to another entity. Expenses are broken down in much the same way as revenue on an Income Statement. For example, Cost of Goods Sold (COGS) only reflects the direct cost or expense of producing the businesses' product or service, while your administrative costs would be on a different line.
1. Microsoft Excel can render the data to prepare these statements.
2. Calc from OpenOffice is a free Excel-like product that can be configured to provide the data to prepare these statements.
3. Quickbooks is probably the most widely used Small Business accounting program that can be used to provide these statements.
By using the information provided by the Income Statement you will be able to conclude whether the company is profitable or not (more value coming into your business than going out) however you will need to utilize the cash flow statement and balance sheet to provide an accurate depiction of the company's health.
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