Basic Income Statements

Looking for Tips About Basic Income Statements?

One of the financial statements prepared for your new small business will be income statements.

A Definition

The Income Statement is a representation of the net results of the small businesses operations over a specified period of time, usually a month, a quarter or for a full financial year.

The statement is generally compiled on a double entry bookkeeping or accrual accounting basis, so that the revenues reported are matched with the expenditure incurred to generate the sales.

Because the Income statement reports on the profit or loss for the period it is sometimes called a Profit and Loss Statement. The amount of profit or loss reported in the statement comprises of net revenues less expenses for the period.

The Profit and Loss or Income Statement reports on four types of activities:

• the cost of producing or manufacturing the goods or services sold by the business,
• the expenses incurred to market, distribute the product or service to the customer and the administrative costs of running the business,
• the financing costs of the business, for example interest or dividend costs, and of course,
• the income earned by the small business during the reporting period.

The usual layout for an Income Statement is:

Sales or Income
Less Cost of Goods Sold

Equals Gross Profit or Loss

Less Operating Expenses
Less Financing Costs
Less Income Tax

Equals Net Profit or Loss

Would you like to see an example?

If it would help if you could see a sample of an Income Statement you can find one by clicking on this link. Feel free to download or print a copy!

Other Small Business Financial Statements

If you landed on this page without seeing the other pages that relate to the other financial statements that you will be preparing for your small business, click on any of the links below.

• Balance Sheet,
• Cash Flow Statements, and an
• Aged Debtors Report.

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