Income Statement
A financial statement showing revenues, expenses, and profits over a period of time.
The income statement (also called the P&L) summarizes revenues, costs, and expenses over a specific period. It starts with revenue, subtracts COGS for gross profit, then subtracts operating expenses for operating income, and finally accounts for interest and taxes to arrive at net income. Comparing income statements across periods reveals trends in growth and profitability.
Example
A consulting firm's quarterly income statement shows $200,000 in revenue, $30,000 in COGS, $120,000 in operating expenses, and $50,000 in net income before taxes.
Why It Matters for Your Business
The income statement is your profitability scorecard—without one, you can't tell whether your business is making money, losing money, or breaking even.
Practical Tips
- •Review your income statement monthly to catch trends early, not just at year-end.
- •Compare each line item as a percentage of revenue across periods to spot changes.
Related Terms
More Accounting Terms
Accounts Payable
Money owed by a business to its suppliers or creditors for goods or services received but not yet paid for.
Accounts Receivable
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Accrual Accounting
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Asset
Any resource owned by a business that has economic value and can provide future benefits.
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific point in time.
Related Financial Guides & Resources
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