Also called a profit and loss statement, or a "P&L," an income statement lists your income, expenses, and net income (or loss). The net income (or loss) is equal to your income minus your expenses. Your business's tax return will use a variation of the income statement to determine your potentially taxable income.
The income statement is prepared after all adjusting entries are made in the general journal, all journal entries have been posted to the general ledger, the general ledger accounts have been footed to arrive at the period end totals, and an adjusted trial balance has been prepared from the general ledger totals.
Financial statements normally do not show cents. All amounts should be rounded to the nearest dollar.
The following is an example of an income statement:
|Beta Sales Company
For the Year Ended December 31, 2001
|Cost of Goods Sold|
|Beginning Inventory||$ 27,335|
|Less: Ending inventory||32,090|
|Cost of Goods Sold||230,934|
|Repairs and maintenance||13,984|
|Net Income||$ 62,581|
For more detailed information on income statements and other financial statements, see our full discussion of financial statements