Income Statement Template
Income statement, profit and loss statement or statement of operations are widely used in all businesses along with the balance sheet and cash flow statement to assess the company’s financial position for a specific period of operation. This statement basically summarizes company’s revenue and expenses details on a single sheet to give a better view of the financial performance of the organization. Typically, this statement is generated monthly, annually or even quarterly while giving an overview of profit or loss of the company for the given time period.
This statement plays a vital role in determining the position of a business and ensures that the entity is working in profitability or not. Apart from working on the going concern of the entity, this statement can be used in comparing the profitability of the entity in two periods of time.
This helps the business in getting the idea about the increase or decrease in sales, revenue, income or expenses. Making informed business decisions in attaining the required profitability and cash flow becomes easier because of this statement. Moreover, it provides limited information required by financial organizations in reviewing loan applications, tax authorities, and prospective investors.
The most common use of this statement is to track revenues and expenses of the entity so that the company can easily conclude the operating performance of the business over a specified period of time. Typically, owners of small scale businesses use this statement and find out what areas of their business need improvement or are outside the budget. Furthermore, by wisely using this statement, specific items of high or unexpected expense can be pinpointed and by cutting the unwanted costs net income can be increased.
These items may include, operating expenses like electricity utilization, fax costs, or phone bills, etc. Just by tracking drastic increases in sales returns or cost of goods sold a lot of changes in the overall performance of the company can be made.
Some of the basic components of a typical income statement include sales or revenue, the cost of goods sold, operating expenses, other income, net income, profit or loss before tax, taxes or other deductions and profit or loss after the tax deduction.