How do you prepare an income statement?

Making your income statement first lets you see your business’s net income and analyze your sales vs. debt. When creating the statement, list the revenues first. Then, subtract your expenses from the revenue. The bottom line of your income statement will let you know whether you have a net income or loss for the period.

How do you read an income statement?

Tip: There are two main ways to analyze an income statement. Vertical analysis calculates the percentage of each line item from a single base figure in the statement, such as a percentage of gross sales. This makes it easy to compare financial statements between companies and industries regardless of their different sizes.

What is the purpose of an income statement?

An income statement is a financial statement that shows you the company’s income and expenditures. It also shows whether a company is making profit or loss for a given period. The income statement, along with balance sheet and cash flow statement, helps you understand the financial health of your business.

What is included in an income statement?

Income statements usually include a heading with the name of the company, the title of the statement, and the time period. Depending on the company’s size and complexity, the income statement can be large or small. A condensed income statement will have three main categories: revenues, expenses, and net income or loss.