Income Statement

The income statement is a measure of the performance of a company (financially speaking of course) over a specific period of time. This differs from other financial reports (like the balance sheet) that measure for a specific point in time. The time span is, in general, a month, a quarter, or a full year.

What does this look like? The income statement is designed to give a basic overview of revenue and expenses, including both operating and non-operating expenses. In other words, it summarizes net income and sales.

What's needed? All source of revenue and expenses. This includes Operating and Non-Operating expenses. Operating expenses are any expenses required for operating, but that aren't directly tied to the production of a product. This would include marketing and sales expenses (commission, advertising, etc.) and office related (utilities, supplies, etc.), etc. Non-operating would be anything not directly tied to the main activities of the business. This would include depreciation, interest on borrowed money, amortization, obsolete inventory charges, etc.

The Formula: Net Income = Revenue - Expenses

What to remember: The income statement is crucial in helping a company determine how well they are performing, therefor it's crucial to have detailed records and to not take this financial report lightly. Also, this is a very brief overview... i.e. talk to your accountant.