Posted in Finance, Accounting and Economics Terms, Total Reads: 725
Definition: Income Statement
Income Statement is a financial statement which tells about the performance of company(financial) over a specific period of time like a quarter, year, 4 months, half yearly etc. It is also called a Profit and Loss(P/L) statement because an income statement shows profitability or loss of a business.
Major parts of an income statement include Revenues and gains from primary as well as other activities of a company. The other important part is the Losses and Expenses.
If we think income of anyone you will think revenue-losses, same is the concept of Income statement.
Now let us see
1) Revenues & Gains
2) Expenses & Losses
Revenue can be divided as per Operating and Non Operating Gains. Operations gains are the ones which come from direct line of business operations like Revenue from selling products/services. Non Operating Revenue can be like Sales of old Assets, subsidiary etc or any other source which is not directly linked to main primary line of business.
Expenses like Revenues can also be again from Operating(primary) and Non Operating(Secondary) activities. COGS is a primary expense. Now may be an Interest paid to bank for a loan is secondary expense.
As far as formula is concerned it is simply : (Revenues+Gains)-(Expenses)
A very basic format can be
More commonly used format is
Total Op Expenses
Total Non Op
Net income can be further adjusted for Profits and Interest.