| | This article does not cite any references or sources. (November 2007)
Please help improve this article by adding citations to reliable sources. Unverifiable material may be challenged and removed. | An Income Statement, also called a Profit and Loss Statement (P&L), is a financial statement for companies that indicates how Revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line"). The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. Image File history File links Question_book-3. ...
Financial statements (or financial reports) are a record of a business financial flows and levels. ...
For the tax agency in Ireland of the same name, see Revenue Commissioners. ...
Net income is equal to the income that a firm has after subtracting costs and expenses from the total revenue. ...
he is the best in the world, some call him the junior jose, special 1 version 2 ...
An investor is any party that makes an investment. ...
Charitable organizations that are required to publish financial statements do not produce an income statement. Instead, they produce a similar statement that reflects the fact that the charity is not operating to make a profit.
Usefulness and limitations of income statement Income statements should help investors and creditors determine the past performance of the enterprise, predict future performance, and assess the capability of generating future cash flows.
However, information of an income statement has several limitations:
- The items that might be relevant but cannot be reliably measured are not reported (e.g. brand recognition and loyalty)
- some numbers depend on accounting methods used (e.g. using FIFO or LIFO accounting to measure inventory level)
- some numbers depend on judgments and estimates (e.g. depreciation expense depends on estimated useful life and salvage value).
See also: Creative accounting In a stack, the topmost item, which is added last, is taken out first. ...
Inventory is a list of goods and materials, or those goods and materials themselves, held available in stock by a business. ...
Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ...
Creative accounting and earnings management are euphemisms referring to accounting practices that may or may not follow the letter of the rules of standard accounting practices but certainly deviate from the spirit of those rules. ...
- INCOME STATEMENT BOND LLC - For the year ended DECEMBER 31 2007 $ $ Revenues: GROSS PROFIT (including rental income) 496,397 -------- Expenses: ADVERTISING 6,300 INSURANCE 750 LEGAL & PROFESSIONAL SERVICES 1,575 RENT 13,000 UTILITIES 491 PRINTING, POSTAGE & STATIONERY 320 ENTERTAINMENT 5,550 LICENSES 632 BANK & CREDIT CARD FEES 144 BOOKKEEPING 3,350 EMPLOYEES 88,000 RENTAL MORTGAGES AND FEES 74,400 -------- TOTAL EXPENSES (194,512) -------- NET INCOME 301,885 ========
Items on income statement
Operating section - Revenue - Cash inflows or other enhancements of assets of an entity during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major operations. Usually presented as sales minus sales discounts, returns, and allowances.
- Expenses - Cash outflows or other using-up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major operations.
- General and administrative expenses (G & A) - represent expenses to manage the business (officer salaries, legal and professional fees, utilities, insurance, depreciation of office building and equipment, stationery, supplies)
- Selling expenses - represent expenses needed to sell products (e.g., sales salaries and commissions, advertising, freight, shipping, depreciation of sales equipment)
- R & D expenses - represent expenses included in research and development
- Depreciation - is the charge for a specific period (i.e. year, accounting period) with respect to fixed assets that have been capitalised on the balance sheet.
Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ...
Fixed asset is an accountancy term for assets and property which cannot easily be converted into cash. ...
This article needs additional references or sources for verification. ...
Non-operating section - Other revenues or gains - revenues and gains from other than primary business activities (e.g. rent, patents). It also includes unusual gains and losses that are either unusual or infrequent, but not both (e.g. sale of securities or fixed assets).
- Other expenses or losses - expenses or losses not related to primary business operations.
Irregular items They are reported separately because this way users can better predict future cash flows - irregular items most likely won't happen next year. These are reported net of taxes. - Discontinued operations is the most common type of irregular items. Shifting business location, stopping production temporarily, or changes due to technological improvement do not qualify as discontinued operations.
- Extraordinary items are both unusual (abnormal) and infrequent, for example, unexpected nature disaster, expropriation, prohibitions under new regulations. Note: natural disaster might not qualify depending on location (e.g. frost damage would not qualify in Canada but would in the tropics).
- Changes in accounting principle is, for example, deciding to depreciate an investment property that has previously not been depreciated. However, changes in estimates (e.g. estimated useful life of a fixed asset) do not qualify.
Earnings per share Because of its importance, earnings per share (EPS) are required to be disclosed on the face of the income statement. A company which reports any of the irregular items must also report EPS for these items either in the statement or in the notes. Earnings per share (EPS) are the earnings returned on the initial investment amount. ...
There are two forms of EPS reported:
- Basic: in this case "weighted average of shares outstanding" includes only actual stocks outstanding.
- Diluted: in this case "weighted average of shares outstanding" is calculated as if all stock options, warrants, convertible bonds, and other securities that could be transformed into shares are transformed. This increases the number of shares and so EPS decreases. Diluted EPS is considered to be a more reliable way to measure EPS.
ABC Investments, Inc. STATEMENTS OF INCOME Revenues $10,584.2 $ 9,903.4 $ 9,294.3 Cost of sales 4,747.2 4,456.1 4,224.2 ------------------------------------------------------------------------------ Gross profit 5,837.0 5,447.3 5,070.1 Selling, general and administrative expenses 3,624.6 3,296.3 3,034.0 Other (income) expense, net 90.3 (15.0) 23.0 ------------------------------------------------------------------------------ Operating profit 2,122.1 2,166.0 2,013.1 Interest expense, net 119.7 124.1 142.8 ------------------------------------------------------------------------------ Income before income taxes 2,002.4 2,041.9 1,870.3 Provision for income taxes 680.3 620.6 582.0 ------------------------------------------------------------------------------ Net income $ 1,322.1 $ 1,421.3 $ 1,288.3 ------------------------------------------------------------------------------
Complex example: Viacom, Inc. income statement VIACOM INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) ---------------------------------------------------------------------------------------------- Year Ended December 31, 2004 2003 2002 ---------------------------------------------------------------------------------------------- Revenues $ 22,525.9 $ 20,827.6 $19,186.8 Expenses: Operating 12,545.8 11,879.8 10,735.5 Selling, general and administrative 4,142.1 3,732.3 3,498.6 Depreciation and amortization 809.9 741.9 711.8 Impairment charge (Note 3) 17,997.1 — — ---------------------------------------------------------------------------------------------- Total expenses 35,494.9 16,354.0 14,945.9 ---------------------------------------------------------------------------------------------- Operating income (loss) (12,969.0) 4,473.6 4,240.9 Interest expense (718.9) (742.9) (799.1) Interest income 25.3 11.7 12.0 Other items, net 7.6 (3.0) (32.9) ---------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations before income taxes, equity in earnings (loss) of affiliated companies and minority interest (13,655.0) 3,739.4 3,420.9 Provision for income taxes (1,378.6) (1,497.0) (1,338.3) Equity in earnings (loss) of affiliated companies, net of tax (20.8) .1 (37.3) Minority interest, net of tax (5.1) (4.7) (3.3) ---------------------------------------------------------------------------------------------- Net earnings (loss) from continuing operations (15,059.5) 2,237.8 2,042.0 ---------------------------------------------------------------------------------------------- Discontinued operations (Note 2): Earnings (loss) from discontinued operations (1,182.7) (718.8) 255.3 Income taxes, net of minority interest 92.4 (83.6) (90.7) ---------------------------------------------------------------------------------------------- Net earnings (loss) from discontinued operations (1,090.3) (802.4) 164.6 ---------------------------------------------------------------------------------------------- Net earnings (loss) before cumulative effect of accounting change (16,149.8) 1,435.4 2,206.6 Cumulative effect of accounting change, net of minority interest and tax (Note 1) (1,312.4) (18.5) (1,480.9) ---------------------------------------------------------------------------------------------- Net earnings (loss) $ (17,462.2) $ 1,416.9 $ 725.7 ---------------------------------------------------------------------------------------------- Basic earnings (loss) per common share: Net earnings (loss) from continuing operations $ (8.78) $ 1.28 $1.16 Net earnings (loss) from discontinued operations $ (.64) $ (.46) $ .09 Net earnings (loss) before cumulative effect of accounting change $ (9.42) $ .82 $ 1.26 Cumulative effect of accounting change $ (.77) $ (.01) $ (.84) Net earnings (loss) $(10.19) $ .81 $ .41 Diluted earnings (loss) per common share: Net earnings (loss) from continuing operations $ (8.78) $ 1.27 $ 1.15 Net earnings (loss) from discontinued operations $ (.64) $ (.46) $ .09 Net earnings (loss) before cumulative effect of accounting change $ (9.42) $ .82 $ 1.24 Cumulative effect of accounting change $ (.77) $ (.01) $ (.83) Net earnings (loss) $(10.19) $ .80 $ .41 Weighted average number of common shares outstanding: Basic 1,714.4 1,744.0 1,752.8 Diluted 1,714.4 1,760.7 1,774.8 Dividends per common share $ - $ .25 $ .12
Top line The term "top line" refers to the total revenues or sales mentioned in the income statement. This refers to the fact that the total revenues collected by a company appears at the top of the income statement.
Bottom line "Bottom line" is the net profit that is calculated after subtracting the expenses from revenue. Since this forms the last line of the income statement, it is generally referred to as the bottom line. It is important to investors as it represents the profit for the year attributable to the shareholders. For articles with similar names, see Bottom line (disambiguation). ...
See also Comprehensive income is defined by the Financial Accounting Standards Board, or FASB, as “the change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. ...
It has been suggested that Accounting scholarship be merged into this article or section. ...
This article does not cite any references or sources. ...
This article needs additional references or sources for verification. ...
External links Image File history File links This is a lossless scalable vector image. ...
|
Feeds |
Contact