Income Statement Key Features

It lists only the income and expense accounts and their balances.

Income statement key features. The income statement contains several subtotals that can assist in determining how a profit or loss was generated. The end product of these transactions is net income or loss. The income statement shows investors and management if the firm made money during the period reported. An account called purchases is used to track goods purchased.

All the money a business receives in selling its products or services is called revenue or sales and tracked in these accounts. Generally accepted accounting practices gaap also refer to this report as statement of income because the income statement shows not. The gross profit is derived by netting revenues and the cost of goods sold together and provides an indicator of the ability of a business to set price points that customers will accept and to maintain the cost of the goods and services that it provides. The three main characteristics of an income statement are.

Provides detailed information on revenues the income statement provides detailed data on revenues. Besides the normal costs such as the cost of goods sold cogs employee expenses operational expenses it also accounts for additional costs like taxes applicable. The key income statement accounts include. All money the company must spend to buy or manufacture the goods or services it sells to customers is tracked in these accounts.

Advantages of income statement. Revenues are the earnings a firm earns during the period. The operating section of an income statement includes revenue and. As you can see this example income statement is a single step statement because it only lists expenses in one main category.

Similarly on the revenue front it accounts not only for revenues earned from sales but also factors in for revenues gained from non operational components like interest accrued by different. Income statement and balance sheet overview. It does not differentiate between cash and non cash receipts sales in cash versus sales on credit or the cash. The income statement can be run at any time during the fiscal year to show a company s profitability.

The income statement focuses on four key items revenue expenses gains and losses. The income statement consists of revenues and expenses along with the resulting net income or loss over a period of time due to earning activities. Some also call the income statement a statement of profit and loss or p l. The income statement totals the debits and credits to determine net income before taxes.

Here is an example of how to prepare an income statement from paul s adjusted trial balance in our earlier accounting cycle examples. Single step income statement. Cost of goods sold. Quarter to date month to date year to date revenues.

Key takeaways key points. An income statement should only include transactions that occurred within a certain period of time e g.