How to complete an Income Statement

What is an Income Statement?

An Income Statement, also known as a Profit and Loss Statement, is defined as a financial statement that shows the revenue, expenses, gains, and losses of a business over a specific period.

What is Revenue?

Revenue is defined as the money or income that a business or an individual earns from the sale of products or services, or from other sources.

What are Expenses?

Expenses are defined the cost of operations that a company incurs to generate revenue.

An income statement is completed by using the below equations.

  1. Gross Profit = Revenue (Net sales) – Cost of Goods Sold

  1. Operating Income = Gross Profit – Total Operating Expenses
  1. Net income = Operating Income + Non-Operating Items (Total Other Income)