Income Statement
/ˈɪnkʌm ˈsteɪtmənt/
An income statement is a financial document that shows how much money your company earned and spent over a specific period, ultimately revealing whether you made a profit or loss.
An income statement is a financial document that shows how much money your company earned and spent over a specific period, ultimately revealing whether you made a profit or loss.
An income statement starts with your total revenue at the top, then subtracts all your expenses (like salaries, rent, and materials) to show your profit or loss at the bottom.
It's essentially a detailed record of money coming in minus money going out, presented in a standardised format that makes it easy for anyone to understand your financial performance.
An income statement shows your financial performance over a period of time (like a year or quarter), whilst a balance sheet shows what you own and owe at a specific point in time.
Think of the income statement as a film showing what happened, and the balance sheet as a photograph of where things stand right now.
You'll need to prepare an income statement at least annually for your statutory accounts filing, but most businesses create them quarterly or monthly for internal management purposes.
Investors and lenders will almost always request income statements when evaluating your business, and banks typically want to see them when you're applying for financing.
Your income statement includes revenue from sales, the cost of producing your products or services, operating expenses like marketing and administration, interest payments, taxes, and finally your net profit or loss.
These items are organised in a specific order that helps readers understand how different types of costs affect your profitability.
An income statement helps you understand whether your business model actually works financially and where you're spending money inefficiently.
It's also the primary document investors use to assess your company's viability and growth trajectory, making it essential for fundraising conversations.
Yes, you might hear it called a profit and loss statement (P&L), statement of operations, or statement of earnings - these all refer to the same document.
Accountants and investors use these terms interchangeably, though "profit and loss" is particularly common in everyday business conversations.
