Better Financial Performance by Using Income Statement Template
Income statement is also known as profit loss statement of a company in a year which uses income statement as its form. It is one of the major financial statements that are usually used by business owners or an accountant. Other than income statement, there are some other major financial statements which also used, such as balance sheet statement, statement of cash flows, and the statement of stockholders’ equity. Income statement does not represent the money you receive nor the disbursement, but it shows the income, expense, profit and losses. In other word, the statement is a presentation of a business’s financial performance that’s annually reported.
Balance sheet may be used for one moment in time, but it is different with profit and loss where it covers about the time period. It is the kind of statement that’s divided into two parts, the first is operating where it reveals the direct result of income and expense for a regular business, meanwhile the second is non-operating portion where it states about the income and expenses of the activity which is indirectly related to the regular business. The purpose of using this kind of statement is to report the managers and also investors whether the company is gaining or losing money in a period time.
To prepare the profit loss statement, there is one of two methods that can be used for. It is the Single Step method which presents the total of income and subtracts the expense in order to find the bottom line. It is simpler than the other method, Multi-Steps, where it is more complex with some steps needed which resembled the name of the method itself. That is why, Single Step will be the right way to count the profit lost statement of a business and by this statement, the investors are able to predict the future performance and also define the past performance.
There are some elements which are included in their income statements by most of the companies. Revenue and gains consist of revenue from primary and secondary activities and the gain itself. Expenses and losses shows the expense involved in primary and secondary activities and losses. So that, to create a billing statement should consider those elements. You also have to pay attention to several limitations such as items which might be relevant, numbers depend on the accounting method, and numbers depend on judgement and estimate. International Accounting Standard Board provides the guideline for comprehensive and income statements. In addition, summary values can also be added into the income statement.
If you want to make an income statement for the business you operate, there are four easy steps of how to make an income statement. Before you make it, the first thing is to consider about the time period for the statement itself. You may choose monthly, quarterly, or annually in micro and macro level. Monthly income statement is the most common statement chosen by many of companies. Then, you can add up the revenue where you can also add money owed as the revenue. The different service of product will affect the different source income too. After that, calculate the expenses include cost of goods and service, general and administrative expense, employee compensation, marketing, and advertising. Last but not least, is to determine the profit.
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