The Income Statement: Types and Examples displays the company’s revenue, costs, gross profit, selling and administrative expenses, other expenses and income, taxes paid, and net profit in a coherent and logical manner. An analyst should identify differences in companies’ expense recognition methods and adjust reported financial statements where possible to facilitate comparability. It’s important to note that there are several different types of income statements that are created for different reasons.

In turn, they can inform operational or management decisions, help investors make smart decisions, assist creditors or lenders with risk assessment, and more. Some investors might even call a company and seek “special insight” about emerging trends and developments. Be aware, however, that the company will likely not be able to respond in a meaningful way.

Income Statement Template

FreshBooks https://personal-accounting.org/s a range of income statement and balance sheet examples to suit a variety of businesses, no matter if you have just started out or if you are looking for a different solution. An income statement that presents a subtotal for gross profit is said to be presented in a multi-step format. One that does not present this subtotal is said to be presented in a single-step format. Analysts often look to cash flow from operationsas the most important measure of performance, as it’s the most transparent way to gauge the health of the underlying business.

• Shareholder equity can be either positive or negative, depending on the organization’s debt-to-asset and debt-to-equity ratios.
• Assets are everything a company owns and can be used to generate revenue.
• The expenses incurred in connection with the sale of goods and marketing are called selling expenses.
• Anna now has to pay for all the interest owed to banks as well as the taxes she owes to the government.
• Recognition of revenue when earned is a fundamental principal of accrual accounting.

If the company is a service business, this line item can also be called Cost of Sales. For example, Office salaries, rent-administrative building, insurance, office supplies expense, postage, telegram, conveyance, general expense, depreciation expense, office equipment, furniture etc. After discounting for any nonrecurring events, it’s possible to arrive at the value of net income applicable to common shares.

Other Income

The format used is the single-step format, one of the two most commonly used income statement formats. How you calculate this figure will depend on whether or not you do cash or accrual accounting and how your company recognizes revenue, especially if you’re just calculating revenue for a single month. Income Statement shows net profit or net loss arising out of activities of a particular accounting period of any business organization. Operating Income Before Depreciation and Amortization shows a company’s profitability in its core business operations.