Income Statement

Financial Dictionary -> Investing -> Income Statement

An income statement is used to show investors and executives if a company has profits or losses for certain time period; (a profit and loss statement or a P&L). In this financial statement is information on how revenue is transformed into net income. Revenue is the money received before any expenses are taken; also referred to as the top line. Net income is referred to as the bottom line - when all the revenue and operating costs have been taken. Income statements help investors and creditors determine the past of an enterprise, at the same time it will give them an idea of possible future performance and revenue. A charitable organization do not produce an income statement they must complete a similar statement that provides funding sources and then compares them to the expenses (operating and administrative costs) of the organization. Some financial information cannot be included on the report; items that cannot be reported or measures, some accounting methods and some estimates.

The report is broken into sections; Let's look at each section to show you the format of the statement.
- The first section would be the operation section where you will indicate the revenue and the expenses.
- The next section will be the non-operation section where you will show any other revenues or gains, such as rent, any income that that is not included in the primary income, and then also any other expenses or losses will go in this section as well.
- The next section is for irregular items, these need to be separated from the other sections.
- The last section is the earnings per share, known as the EPS, if you have any irregular items you will also need to provide the earnings per share for those earnings as well.

This statement is very important and will be used as an over view of your financial abilities as a business. This information will be used by investors to help predict the financial future of your business, therefore helping them make a decision in your investment.