Income Statement Major Expense Categories

The income statement shows the business s income expenses gains and losses.

Income statement major expense categories. The income statement may have minor variations between different companies as expenses and income will be dependent on the type of operations or business conducted. You ve presented your operating results the very core results of your business and everything supporting it and now you show what s the extra bit you do with your funds. Income statement shows net profit or net loss arising out of activities of a particular accounting period of any business organization. The most common income statement items include.

In reality companies often use more complicated multiple step income statements where key expenses are separated into groups or categories. Some also call the income statement a statement of profit and loss or p l. Generally accepted accounting practices gaap also refer to this report as statement of income because the income statement shows. However there are several generic line items that are commonly seen in any income statement.

The most common tax deductible expenses include depreciation and amortization rent salaries benefits and wages marketing advertising and promotion. As you can see this example income statement is a single step statement because it only lists expenses in one main category. A classified income statement is a financial report showing revenues expenses and profits for which there are subtotals of the various revenue and expense classifications. The positive inter annual trends in all the income statement components both income and expense have lifted the company s profit margins net income net sales from 40 to 44 again that s.

The income statement also called a profit and loss statement is one of the major financial statements issued by businesses along with the balance sheet and cash flow statement. The classified format is used for more complex income statements to make them easier for users to read. Tax or taxation is actually shown in a simplified way in that income statement as it is a single step income statement. Here is an example of how to prepare an income statement from paul s adjusted trial balance in our earlier accounting cycle examples.

Income statements are 2 types single step income statement and multiple step income statement for finding net profit or loss an accounting period. In multiple step income statements tax is shown on. Financial expenses and income on your income statement are the last group of results presented just after the operating profit. The end product of these transactions is net income or loss.

A major expense shown in our first income statement example above is tax. Most but not all expenses are deductible from a company s income revenues to arrive at its taxable income.