Income statement
The income statement, also known as the "earnings statement" or "statement of operations", is one of the three financial statements used by accountants, business owners, and investors. The income statement provides a detailed look into how profitable a business has been over a designated period of time. It demonstrates how well the business has managed sales, expenses, interest paid, and taxes. If managed properly the income statement will show a net income. However, if the income statement shows a net loss it means the business was unable to operate profitably.
The income statement can be presented in two formats, the single-step and the multi-step. The single-step income statement adds the revenues and gains notated by the company, and the same is done for the expenses and losses. After this is completed the difference is taken between the two and the result will be the net income or loss for the company. The multi-step income statement displays the gross profit, which is the difference of sales and cost of goods sold; the operational income, which is the gross profit minus operating expenses minus depreciation; then the earnings before interest and taxes is calculated; and finally the interest paid and taxes are calculated into the income statement equaling the net income after taxes.
Creating an Income Statement
Single-Step Format
Net Sales
(also known as sales or revenue) The net sales in the income statement designates the amount of sales a company has generated after sales discounts, returns, and/or allowances have been deducted from the total sales of a specified period.