An Income Statement Example

Income statements are something that you\’ll come across over and over in college and in your business career, so it\’s an important thing to know. Knowing what an income statement template looks like is the first key to understanding income statements. There are a few main concepts that you need to be familiar with to fully understand income statements and what they mean.

Probably the first thing you should understand about income statements is revenues. If you don\’t understand revenues, then the rest of the income statement won\’t make much sense. Revenues come from your primary business activities that you\’re involved in.

Gains are different from revenues because they are any money earned from transactions that aren\’t related to the business. Let\’s say that you decided to buy a new pair of shears for your business, so you sell your old ones. If you sell your old shears for a profit, then you have a gain. It\’s a gain and not revenue since you\’re not in the business of selling shears.

Another important element of income statements are expenses. Expenses are the costs of doing business. For a business that sells flowers, it would be the costs involved with purchasing the flowers to be sold. It would also be the costs involved with growing the flowers instead of purchasing them.

Losses are another part of most income statements. Losses occur when a business loses money on a transaction that isn\’t involved with the main business. Like the previous example, if you sold your old flower shears to a friend and you lost money on the deal, that would be a loss, it wouldn\’t be an expense.

The basic format of any income statement can be summarized as revenues minus expenses equal net income. If you can remember that you\’ll always be able to format an income statement.

The last thing you need to know about income statements is that they cover a time period, such as a year or quarter.

Income statements are useful tools that can help you make better decisions with business finances and transactions throughout your career.

Learn more about formatting an income statement example. Stop by our site to learn more about income statement examples and what they can do for you.