Methods for Constructing the Income Statement This is in contrast to the balance sheet, which represents a single moment in time. The income statement reflects a company’s performance over a period of time. Net income (the “bottom line”) is the result after all revenues and expenses have been accounted for. The income statement consists of revenues (money received from the sale of products and services, before expenses are taken out, also known as the “top line”) and expenses, along with the resulting net income or loss over a period of time due to earning activities. It is also known as the profit and loss statement (P&L), statement of operations, or statement of earnings.Ī Sample Income Statement: Expenses are listed on a company’s income statement. The income statement is a financial statement that is used to help determine the past financial performance of the enterprise, predict future performance, and assess the capability of generating future cash flows. statement of cash flows: a financial document that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.income bond: a debt instrument where coupon payments are only made if the issuer can afford it.net income: Gross profit minus operating expenses and taxes.gross profit: The difference between net sales and the cost of goods sold.income statement: a calculation which shows the profit or loss of an accounting unit during a specific period of time, providing a summary of how the profit or loss is calculated from gross revenue and expenses.It is important to investors – also on a per share basis (as earnings per share, EPS) – as it represents the profit for the accounting period attributable to the shareholders. The “bottom line” of an income statement is the net income that is calculated after subtracting the expenses from revenue.The non-operating section includes revenues and gains from non-primary business activities, items that are either unusual or infrequent, finance costs like interest expense, and income tax expense.Revenue consists of cash inflows or other enhancements of assets of an entity, and expenses consist of cash outflows or other using-up of assets or incurring of liabilities. The operating section of an income statement includes revenue and expenses.
The income statement shows investors and management if the firm made money during the period reported. The income statement consists of revenues and expenses along with the resulting net income or loss over a period of time due to earning activities.