Undrestand the Financial Statements – The Income Statement

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What is an Income Statement.We already know that the balance sheet targets the financial condition of a company at a given date, the income statement covers the financial performance in the same period. Financial statement aslo called by other names, such as profit and loss statement, operation statement, statement of earnings and statement of revenue and expense.
Income Statements are all divided into five main sections, as follow:
1. Revenues
Revenue is the sources of income that the companies received for good sold. The amount is generally represented by one figure,such as the total sales.

2. Cost of goods sold
The Cost of Goods Sold is the cost of service rendered in the period. This item may be represented by a single line in the income statement.

3. Expenses
Expense entries are self-explanatory and include bad debts and depreciation

4. Interest income
Interest Income includes
* Total income before taxes.
* Net Income before taxes.
* Profit or earning before taxes.

5. Tax
After corporate income taxes have been paid, the remainder is the net income for the year.
Net income = net revenue – cost, expenses and taxes
Finally, We could like to mention that When it comes to income statement, a positive balance indicates a profit, while a negative balance indicates a loss. A series of annual income statements are required to find out which way the business is heading.

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