The income statement which some refer to as a profit and loss statement summarizes a company’s revenues (sales) and expenses for the time period stated in its heading. An income statement recognizes revenues when they are realized or when the service is rendered and is designed to measure past profitability.

Simply, the information found on an Income Statement is business revenue, expense, and profit / loss.

Revenue can be defined as the total income that an organization receives. The revenue is generally further broken down into sub-categories or displayed on different lines based on whether the income was derived from normal business operations or not.

Expense on an income statement is simply the outflow of money or value from the business to another entity. Expenses are also categorized in much the same way as revenue is on an Income Statement. For example, Cost of Goods Sold (COGS) only summarizes the direct cost or expense of creating the businesses’ product or service, while your depreciation costs would be on a different line.

1. Microsoft Excel can render the data to prepare these statements.

2. Calc from OpenOffice is a free Excel-like product that can be configured to provide the data to prepare these statements.

3. Quickbooks is a Small Business accounting program that can be used to provide these statements.

By using the data provided by the Income Statement you can determine whether the company is profitable (more value coming into your business than going out) but you will need to utilize the cash flow statement and balance sheet to give a full picture of the company’s health.

Tags: Business

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