Introduction:
An income statement is best classified as a part of ‘financial statement’ emphasizing over the financial performance of the company for a limited accounting period. It is worth mentioning that an ‘income statement’ calculates the financial performance or its sustainability by highlighting how a company handles its bucket full of expenses and revenues through operating/non-operating activities.
Furthermore, an income statement underlines the amount of ‘net profit’ or ‘net loss’ for a limited time period (fiscal quarter or the whole year); both the accounts are liable to malfunction as per its operations in the market. In accounting standards, the ‘income statement’ is also termed as the ‘profit and loss statement’ or more familiarly as ‘summary of revenue and expenses’.
A “Run Down” For The Income Statement:
- The top accountants consider ‘Income Statement’ as a document of paramount importance when it’s compared with the other sections that make up the financial statements of a company. The other two are ‘balance sheet’ and ‘statement of cash flows’.
- An income statement is classified into two major sections; one is ‘operating activities’ and the other is ‘non-operating activities’.
- The account for ‘operating activities’ is best to showcase to the investors and analysts as it bags information regarding the overall company’s revenue and expenses that came into action after certain business operations, which is considered a healthy move in the markets.
- For example : “If a business setup emphasizes over creating sports equipment then its ‘operating activities’ would showcase the revenue and expenses which company has utilized for producing the sports equipment. It should be in accordance with the kind of business we run in the markets.