The Income StatementThe Income Statement

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What is an Income StatementWhat is an Income Statement

Remember, a Balance Sheet is a Remember, a Balance Sheet is a snapshot of a business on one day in snapshot of a business on one day in timetime

An Income Statement shows what An Income Statement shows what happens over a period of time in a happens over a period of time in a business, it could be one month, six business, it could be one month, six months, or a yearmonths, or a year

An Income Statement shows how An Income Statement shows how much money a business made or lost much money a business made or lost over a period of timeover a period of time

The Income StatementThe Income Statement

As a business operates it makes As a business operates it makes money from daily activitiesmoney from daily activities

Through these daily activities the Through these daily activities the business also accumulates costsbusiness also accumulates costs

What are some of the costs of day to What are some of the costs of day to day operations for a business?day operations for a business?

The Income StatementThe Income Statement

REVENUEREVENUE - The money, or the - The money, or the promise of money, received from the promise of money, received from the sale of goods or servicessale of goods or services

EXPENSESEXPENSES – Costs incurred to help – Costs incurred to help generate the revenue of a business generate the revenue of a business (eg. Salaries, Utilities, Fuel, (eg. Salaries, Utilities, Fuel, Maintenance)Maintenance)

The Income StatementThe Income Statement

Just like the Balance Sheet, the Just like the Balance Sheet, the Income Statement has a three line Income Statement has a three line heading:heading: Who?Who? What?What? When?When?

The sources of Revenue are listed The sources of Revenue are listed nextnext These are listed in alphabetical orderThese are listed in alphabetical order

The Income StatementThe Income Statement

EXPENSESEXPENSES are listed are listed afterafter the the REVENUEREVENUE, , this is done in alphabetical orderthis is done in alphabetical order

Lastly, a net income, or net loss is Lastly, a net income, or net loss is calculatedcalculated This is completed by subtracting the expenses This is completed by subtracting the expenses

from the revenuefrom the revenue A net income occurs when the revenue is A net income occurs when the revenue is

larger than the expenses, and a net loss larger than the expenses, and a net loss occurs when expenses are greater than occurs when expenses are greater than revenuerevenue

Revenue:An increase in equity resulting from the sale of goods or services

Expenses:A decrease in equity resulting from the cost of the goods or services used to produce the revenueExpenses are shown in detail and in alphabetical order

Three line heading:• Who?• What?• When?

Net Income• The difference between total revenues and total expenses

Net Loss: Occurs if expenses are greater than revenues