Income statement

Income statement - Income statement (overview) Accounting...

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Income statement (overview) – Accounting 205 The income statement is a historical record of the trading of a business over a specific period (normally one year). It shows the profit or loss made by the business – which is the difference between the firm’s total income and its total costs. The income statement serves several important purposes: Allows shareholders/owners to see how the business has performed and whether it has made an acceptable profit (return) Helps identify whether the profit earned by the business is sustainable (“profit quality”) Enables comparison with other similar businesses (e.g. competitors) and the industry as a whole Allows providers of finance to see whether the business is able to generate sufficient profits to remain viable (in conjunction with the cash flow statement) Allows the directors of a company to satisfy their legal requirements to report on the financial record of the business The structure and format of a typical income statement is illustrated below:
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Income statement - Income statement (overview) Accounting...

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