Income Statement Definition And Purpose

This income statement of teddy s toy shop inc.

Income statement definition and purpose. An income statement shows how much money the company made in a defined time period such as last month last quarter or last year. Read business terms glossary by. The income statement contains several subtotals that can assist in. What is an income statement.

Though the main purpose of an income statement is to convey details of profitability and business activities of the company to the stakeholders it also provides. Income statement purpose 2. Uses of income statements. Balance sheet income statement statement of owner s equity and statement.

The statement starts with the money the company brought in and then subtracts the expenses associated with producing that income such as the cost of supplies payroll and office rental. It is also referred to as a profit and loss statement or earnings statement. Bplans glossary also called profit and loss statement an income statement is a financial statement that shows sales cost of sales gross margin operating expenses and profits or losses. Shows that the company performed well as it made a net profit of 18 650 in the year 2018.

The income statement is a report showing the profit or loss for a business during a period as well as the incomes and expenses that resulted in this overall profit or loss. The purpose of the income statement is to provide the financial earnings performance of the entity over a specific period of time. The format of the income statement components allows for dissecting the revenues expenses operating income and profits of an entity. Through the income statement the reader is able to comprehend how profitable the business is and what are the various business activities that the company has undertaken.

The purpose of the income statement is to show the reader how much profit or loss an organization generated during a reporting period this information is more valuable when income statements from several consecutive periods are grouped together so that trends in the different revenue and expense line items can be viewed. The income statement is one of the main four financial statements that are issued by companies. Income statement definition and purpose the income statement is the first component of our financial statements.