Income Statement Items Explained

The income statement or profit loss p l is a financial accounting report that shows how well firms achieve the highest level business performance objective.

Income statement items explained. Heading revenues and expenses other ordinary items discontinued operations income taxes extraordinary items and earnings per share. This analysis is used to understand the cost structure of a business and its ability to earn a profit a proper analysis of the income statement requires that the following activities be addressed. Here s how an income statement is usually. Identifies the business the financial statement title and the time period summarized by the statement.

An income statement is a financial statement that shows you how profitable your business was over a given reporting period. The reasoning behind the use of the extraordinary category is explained earlier in this chapter. Each step down the ladder in an income statement involves the deduction of an expense. The report includes revenue and expense account figures which realize the income statement equation.

As i explained also in the last article the bank pays customers interest on their deposits and it earns interest on the loans it extends to borrowers. The two main heads in income are net interest income which is earned from lending activities. Also sometimes called a net income statement or a statement of earnings the income statement is one of the three most important financial statements in financial accounting. Examples of service businesses are medical accounting or legal practices or a business that provides services such as plumbing cleaning consulting design etc.

Income revenues expenses. It shows your revenue minus your expenses and losses. The income statement summarizes a company s revenues and expenses over a period either quarterly or annually. The analysis of the income statement involves comparing the different line items within a statement as well as following trend lines of individual line items over multiple periods.

In accounting the terms sales and revenue can be and often are used interchangeably to mean the same thing. While the balance sheet constitutes a financial snapshot at a given point in time such as december 31 the income statement summarizes a financial movie of operational results over a period of time such as for the year ending december 31. The income statement comes in two forms multi step and single step. 3 3 1 income statement items.

What is an income statement. Sales revenue sales revenue sales revenue is the income received by a company from its sales of goods or the provision of services. In the process of actually preparing the income statement a number of items are to be considered. The most common income statement items include.