In this article, we’ll define what an income statement is, how to prepare an income statement, the uses of income statements, and how to read an income statement.Īlso Read: Try QuickBooks Online Accounting SoftwareĪn income statement is one of your business’s most important financial statements and showcases the profit earned or losses incurred by your business during an accounting period.Īn income statement, also known as the trading and P&L account or revenue and expense summary, reveals the performance of your business entity within a specific accounting period. The cash flow statement summarizes the underlying reasons for the changes in your business’s cash position between two balance sheet dates. While the income statement reveals the operational position of your company, the balance sheet showcases the financial strength of your business. That’s why a business entity needs to prepare financial statements in such a manner that provides a true and fair view of that company’s financial position. A proper understanding of these financial statements helps investors understand the profitability and financial soundness of a company. The income statement is one of the three basic financial statements of a company in addition to the balance sheet and cash flow statement. Sample Income Statement in Excel Format Download Now What’s the Difference Between a Balance Sheet and Income Statement?.
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