Income Statement For Tax Purpose

In other words it lets users know the entity s financial situation.

Income statement for tax purpose. Aiman s total monthly income of rm5 002 does not mean that aiman s bank account will increase by that amount in january. The income statement is a report showing the profit or loss for a business during a period as well as the incomes and expenses that resulted in this overall profit or loss. The income statement contains several subtotals that can assist in. Is calculated by deducting income taxes from pre tax income.

Net income net income net income is a key line item not only in the income statement but in all three core financial statements. Investors use this statement along with other financial statements to determine if a business is a good investment. This means that income including revenue is recognized when it is earned rather than when receipts are realized although in many instances income may be earned and received in the same accounting period. The income statement summarizes a company s revenues and expenses over a period either quarterly or annually.

Not surprisingly the income statement is also known as the profit and loss statement. The purpose of the income statement is to show the reader how much profit or loss an organization generated during a reporting period this information is more valuable when income statements from several consecutive periods are grouped together so that trends in the different revenue and expense line items can be viewed. The income statement s primary purpose is to show the financial performance of a. While it is arrived at through the income statement the net profit is also used in both the balance sheet and the cash flow statement.

The purpose of an income statement is to determine if you have a combination of income and expenses that are profitable. The purpose of the balance sheet is to inform the users about the number of assets that an entity has the liabilities that entity owe and the amount of its equity. Income statement is prepared on the accruals basis of accounting. The purpose of the income statement is to show the profitability of a company during a specific period says accountant harold averkamp.