Income Statement Definition
The income statement definition is a financial statement that shows a company’s revenues and expenses over a period of time. Furthermore, it reports a company’s financial performance over the course of an accounting period, typically a month or quarter. Basically, it starts with the money a company earns, and subtracts out the costs of running the business to get the company’s profit or loss.
Income Statement Explanation
You can also call the income statement the statement of earnings, profit and loss statement, or P&L statement. It is often divided into two sections: operating and non-operating. The operating income definition is the revenues and expenses incurred over the course of regular business operations. Then the non-operating income section shows the revenues and expenses incurred from activities that are not considered regular business operations. There may also be a section for irregular items, consisting of revenues or expenses from abnormal or nonrecurring activities. The top line of the income statement is the company’s operating revenues. The bottom line is the company’s net profit or loss.
[box]If you’re struggling to identify your company’s economics, download the free Know Your Economics Worksheet. [/box]
Income Statement Example
For example, James has started a company called Industryco. Industryco is a niche-specific telecom company. James, the founder and CEO of this Industryco, has a lot he is responsible for. For example, one responsibility of James is monitoring the income statements of the company. As a result, James, as with every month, sits down to perform income statement analysis.
First, he looks at the revenue sources of the company. The sales volume of various products and services of Industryco, multiplied by their associated price, make up these numbers.
Then, James looks at company expenses. Combine total costs to simplify the calculation of company profit. Profit, of course, is the motivation to conduct business in the first place. James is looking at the income statement, in the first place, to ensure the stability of company profit. Furthermore, this record allows him to do this with regards to a chosen time period.
If you want to check whether your unit economics are sound, then download your free guide here.
[box]Strategic CFO Lab Member Extra
Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
Income Statement Template
A standardized income statement sample can be found at the Microsoft webpage. It serves as an excellent income statement template to customize for company needs.