Anatomy of an Income Statement

The income statement which is commonly referred to as a profit and loss statement summarizes an organization's revenues (sales) and expenses. The time frame that an income statement reflects should be displayed in its heading. An income statement measures profitability and recognizes revenues when they are realized or when the service is rendered.

The Basic information on an Income Statement is the businesses' revenue, expense, and profit / loss.

Revenue can be described as all income that a company receives. On actual income statements the revenue is generally broken down into sub-categories or displayed on different lines. Typically revenue is categorized by whether or not the income was derived from normal business activity or not.

Expense can be defined on an income statement as the outflow of money or value from the business to another entity. Expenses are broken down in much the same way as revenue on an Income Statement. For example, Cost of Goods Sold (COGS) only reflects the direct cost or expense of producing the businesses' product or service, while your administrative costs would be on a different line.

1. Excel can be configured to provide the data for these statements.

2. Calc from OpenOffice is a free Excel-like product that can be configured to provide the data to prepare these statements.

3. Quickbooks is a Small Business accounting program that can be used to provide these statements.

By using the data provided by the Income Statement you can determine whether the company is profitable (more value coming into your business than going out) but you will need to utilize the cash flow statement and balance sheet to give a full picture of the company's health.