Income Statement Explained: Examples, Format

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income explanation example

It is called the single-step income statement as it is based on a simple calculation that sums up revenue and gains and subtracts expenses and losses. An income statement shows business revenue minus expenses and losses. Your income statement, also called the “profit and loss” statement, goes hand in hand with your cash-flow statement and balance sheet to create a complete snapshot of your business’s financial performance. The income statement is a company’s one of the most important financial statement that indicates profit and loss for an accounting year. This profit or loss is evaluated by adding all revenues and then subtracting the expenses from operating and non-operating activities. Operating income is another, more conservative measure of profitability that goes one step further than gross income.

An income statement helps you analyze trends within your business, allowing you to forecast and plan for the future. Using an income statement, you can track the cost of sales during a certain period of time to determine if your expenses and prices are too high or too low. Comprehensive income is the variation in the value of income explanation example a company’s net assets from non-owner sources during a specific period. Unrealized income can be unrealized gains or losses on, for example, hedge/derivative financial instruments and foreign currency transaction gains or losses. For a business, net income is the total amount of revenue less the total amount of expenses.

Grants are not repaid

You should be able to find income statement templates online, such as our downloadable template below. When searching for the right template to use, consider if you want a single-step or multistep income statement. Also referred to as “net profit,” “net earnings,” or simply “profit,” a company’s net income measures the company’s profitability. Net income is the opposite of a net loss, which is when a business loses money.

If you work for a company—from a small business to a large corporation—your employer may pay you an hourly wage based on the amount of time you work. Or your employer might pay you a salary, which is a fixed amount to do a certain job. Salaries can be paid weekly, biweekly or monthly, but it’s common for them to be expressed as annual figures.


Corporate finance and accounting use the income statement as one of the significant financial statements. This income statement includes gross profit, revenue, costs, taxes paid, net profit, selling and administrative expenses, other expenses, and income, etc. Creditors may find income statements of limited use, as they are more concerned about a company’s future cash flows than its past profitability.

income explanation example

Some candidates may qualify for scholarships or financial aid, which will be credited against the Program Fee once eligibility is determined. Please refer to the Payment & Financial Aid page for further information. Horizontal analysis makes financial data and reporting consistent per generally accepted accounting principles (GAAP).

Operating Expenses and Operating Income Copied Copy To Clipboard

Taxable income includes any ordinary income, or earned income, that comes from your business, your job, or your investments. Tapping your personal assets to fund your business limits your personal and business opportunities. By applying for SBA grants and loans, you can free yourself financially and give your business the stable funding base it needs to succeed and grow. An example is SBA’s Paycheck Protection Program (PPP), which offered loans to help small businesses maintain payroll through the pandemic. Participants could request forgiveness of the principal portion of loan proceeds used to cover payroll, rent, utilities, mortgage interest, and other necessary expenses. Relying on personal assets to fund your operations limits your ability to grow and develop your business.

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  • The definition of income depends on the context in which the term is used.
  • For most people, income means their total earnings in the form of wages and salaries, the return on their investments, pension distributions, and other receipts.
  • These are very similar to grants, but the research is specified by the awarding agency, which contracts out its fulfillment to the small business.
  • At the end of the statement is the comprehensive income total, which is the sum of net income and other comprehensive income.
  • The approach to determining gross income for an individual is slightly different than the approach for a business.

Income is used in the accounting profession to mean several different things. But the government’s spending habits are extremely expensive, and that’s what drives its appetite for revenue. If you’re using the wrong credit or debit card, it could be costing you serious money.

In regards to the individual’s federal income tax, let’s imagine the individual paid $500 in student loan interest for the prior year. When filing their tax return, the student loan interest is an above-the-line deduction used to factor adjusted gross income. Assuming the individual earned the same amount of money this year as last, the individual’s AGI is $86,000 ($86,500 – $500).

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