Income Statement

Also called a profit and loss statement, or a "P&L," an income statement lists your income, expenses, and net income (or loss). The net income (or loss) is equal to your income minus your expenses. Your business's tax return will use a variation of the income statement to determine your potentially taxable income.

The income statement is prepared after all adjusting entries are made in the general journal, all journal entries have been posted to the general ledger, the general ledger accounts have been footed to arrive at the period end totals, and an adjusted trial balance has been prepared from the general ledger totals.

Financial statements normally do not show cents. All amounts should be rounded to the nearest dollar.

The following is an example of an income statement:

Beta Sales Company
Income Statement
For the Year Ended December 31, 2001
Cost of Goods Sold
Beginning Inventory $ 27,335
Add: Purchases 235,689
Total: 263,024
Less: Ending inventory 32,090
Cost of Goods Sold
Gross Profit
Advertising 1,850
Depreciation 13,250
Insurance 5,400
Payroll taxes 8,200
Rent 9,600
Repairs and maintenance 13,984
Utilities 17,801
Wages 98,852
Total Expenses
Net Income
$ 62,581

Business Tools

In the Business Tools area is a sample income statement for your use. It is an Excel 4.0 spreadsheet template, so you can use the template over again; you need to download it only once.

For more detailed information on income statements and other financial statements, see our full discussion of financial statements