What is Income Statement?

Income Statement - Is a report that present revenue, expenses, and net income or net loss for a business for a period of time.

It is divided into two parts.

1. Heading 
2. Body

1. Heading - Asks three questions.

1. WHOSE business is it?
2. WHAT statement is being prepared?
3. WHEN is it being prepared?

2. Body - Lists revenue and expenses.

A comparison of these two items will show either net income or net loss. 

When total revenue exceeds total expenses, the excess represents the income. 

When the total expenses exceed the total revenue, the difference represents a net loss.

Note: The income statement compares the revenue earned for as period of time with the expenses incurred for the same period.

You should remember 

• If the revenue exceeds the expenses, the excess is known as net income.
• If total expenses are greater than revenue, the resulting difference is known as a net loss.

Example: Income Statement

                                           Shehgarlynn Laundry

                                             Income Statement

                                  For the year Ended December 31, 2007

Revenue:

    Income from services......................................................................................$74,000

Expenses:

   Repair expenses.............................................$2,350

   Salaries .........................................................14,500

   Dept. Water and Power...................................5,350

   Gas Company................................................. 2,750

   Miscellaneous Expense ...................................3,560

Total Expenses.....................................................................................................28,510

Net Income .........................................................................................                $45,490