| While learning accounting basic, you can find that | | | | were sold to the customers during the period for |
| income statement is defined as a report that | | | | which income statement is prepared or cost of |
| provides accounting information about a business | | | | services provided to the customers for that |
| to shareholders, government entities, and other | | | | period. These expenses are attributed to cost of |
| interested parties. The accounting information | | | | sales as they directly relate to the revenue |
| provided in this statement is a result of | | | | earned. |
| operations, i.e. profit or loss, during the particular | | | | - Third part - gross profit. This is a difference |
| period. Income statements are produced by a | | | | between total revenue and cost of sales |
| business at various periods. They may be | | | | - Fourth part - operating expenses. These are |
| produced daily, monthly, yearly, etc. This | | | | expenses uncured by the business for the period, |
| statement allows the users quickly get simplified | | | | which are also related to earning the total |
| and accurate knowledge on the financial status of | | | | revenue, however not directly. Usually in operating |
| the entity. Income statements may be compared | | | | expenses we can find salaries to administrative |
| to evaluate the progress of a business, financial | | | | employees, taxes paid, other charges which are |
| status over several accounting periods or to | | | | not directly related to sales. |
| predict the future progress and development | | | | - Fifth part - operating profit. It is a difference |
| trends of business. | | | | between gross profit and operating expenses. In |
| Usually income statement has the following main | | | | financial literature operating profit usually is called |
| parts: | | | | Earning Before Interest and Tax. |
| - First part - total revenue. This is a gross amount | | | | The other parts of income statement depend on |
| for which goods were sold or services were | | | | the particular business. If the business has loans, |
| provided to the customers of the business. Gross | | | | the income statement will include interest |
| means that no expenses related to these sales | | | | expenses indicated after the operating profit in |
| were subtracted from the revenue number. It is | | | | the income statement. If the business is profitable |
| important to understand that when accrual | | | | and pays corporate taxes, these expenses will |
| accounting principle is applied, revenue reflected in | | | | also be indicated in the income statement. |
| the income statement is not equal to the cash | | | | At the bottom of the income statement is the |
| received from customer for the goods, i.e. under | | | | net income, or the increase in equity, earned |
| accrual accounting revenue is the amount business | | | | during the particular accounting cycle. Net income |
| can claim from the customers for goods sold or | | | | is a difference between all revenue earned for |
| services provided. | | | | the period and expenses incurred to earn this |
| - Second part - cost of goods sold or cost of | | | | revenue. |
| services provided. This is a cost of goods which | | | | |