An Income Statement (also referred to as a Profit and Loss Statement(P&L)) is one of the financial statements of a company and shows the company’s revenues and expenses during a particular period. It indicates how the revenues (money received from the sale of products and services before expenses are taken out, also known as the “top line”) are transformed into the net income (the result after all revenues and expenses have been accounted for, also known as “net profit” or the “bottom line”).

Income Statement displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show owners and managers whether the company made or lost money during the period being reported.

An income statement allows you to…

  • Track revenues and expenses to determine company’s profitability.
  • Identify specific items that are causing unexpected expenditures.
  • Determine what areas of your business are over-budget or under-budget.
  • Identify areas to improve
  • Determine your income tax liability.