Income Statement


a.k.a. Profit and Loss
Statement
 
 The Income Statement, also referred to as Profit and
Loss (P&L) Statement, shows an entity's results of
operations for a particular period.

 It presents an entity's revenues and expenses, and

the resulting net income or net loss.
Income Statement Example

Here is a sample income statement of a
service type sole proprietorship
business. Let us name the company
Strauss Printing Services. All amounts
are assumed and simplified for
illustration purposes.

Explanation and Pointers

 An income statement shows the net income or net loss of a business.
This is achieved by deducting all expenses from all income.
 A typical income statement starts with a heading which consists of
three lines. The first line presents the name of the company; the second
describes the title of the report; and the third states the period covered
in the report.
 Notice that the third line is worded "For the Year Ended..." This means
that the income statement presents information for a specific span of
time. In the above example, the period covers 1 year that ends on
December 31, 2019. Hence, the amounts presented in the report are
income and expenses from January 1, 2019 to December 31, 2019.
 Income accounts are presented before expenses. In the above
statement, the income account is Service Revenue. Other income
accounts for service type businesses include Professional Fees, Rent
Income, Tuition Fees, etc.
Explanation and Pointers

 Expenses are presented after the income accounts. It is a good practice to
arrange expenses according to amount (largest to smallest). Some users who are
interested in the company's expenses are concerned about the size of each
expense. Arranging the expenses from largest to smallest results in a more
useful and organized report. Nonetheless, Miscellaneous Expense or Sundry
Expense is presented last.
 If income exceeds expenses, there is a net income. If expenses exceed income,
there is a net loss. Notice how computations are presented. A single line is
drawn every time an amount is computed. The resulting amount is double-
ruled when it is no longer followed by any operation. For example, $57,100 (net
income).
 The income statement complies with the accrual basis of accounting. Income is
recognized when earned regardless of when collected. Expenses are recognized
when incurred regardless of when paid.
 This means that income and expenses presented in the income statement have
been earned and incurred, respectively. Nonetheless, it does not mean that they
have all been collected or paid.
Explanation and Pointers

 International accounting standards suggest that companies should
present other comprehensive income in their financial statements. A
Statement of Comprehensive Income shows the contents of an income
statement followed by a list of "other comprehensive income".
 Other comprehensive income includes gains and losses that cannot be
reported as profit and loss, such as unrealized gains and losses, and
revaluation surplus. This is taken up in higher financial accounting
studies.
 When the company does not have other comprehensive income, the
contents of the income statement and the statement of comprehensive
income are the same. In any case, international accounting standards
favor the use of the title "Statement of Comprehensive Income".
 Statement of
Comprehensive Income

 Here's a sample Statement of Comprehensive
Income, which includes other comprehensive
income. This topic is taken up in higher accounting
so you need not worry about it yet.
