What Is The Income Statement Equation

Some also call the income statement a statement of profit and loss or p l.

What is the income statement equation. The end product of these transactions is net income or loss. Net income total revenue total expenses. All income statements follow this basic format. From this equation management investors and creditors find the ability of the company to producing the profit.

The basic equation for the income statement can be written that total revenues minus total expenses equal net income. The income statement summarizes a company s revenues and expenses over a period either quarterly or annually. The income statement shows the business s income expenses gains and losses. Income statement formula the income statement is one of the major financial statement for a business which shows its expenses revenue profit and loss over a period of time.

Single step income statement example the simplified income statement is. Generally accepted accounting practices gaap also refer to this report as statement of income because the income statement shows not. The profit or loss is determined by taking all revenues and subtracting all expenses from both operating and non operating activities. The income statement formula under multiple step method can be aggregated as below net income revenues non operating items cost of goods sold operating expenses explanation of the income statement formula.

The income statement is one of three statements. Operating expenses cost of goods sold net income revenues. Income statement formula to come up with the net income the income statement equation calculates the difference between increases and decreases. Cost of goods sold operating expenses revenues net income d.

The income statement comes in two forms multi step and single step.