Income Statement
The “income
statement” (or "profit and loss" or "P & L") presents income and expenses over a period of time. It is important to note that the income
statement covers a range of dates, usually an entire month, quarter, or year. The statement starts by listing income or
“revenues” or the “top line.”
Next, operating or “general” expenses or “overhead,” such as rent and office supplies are subtracted to arrive at “operating profit.” Operating costs are generally fixed in nature, as they tend not to increase in the short-term. For example, a company’s rent often remains the same for months or years at a time. Similarly, operating costs such as rent are not directly tied to any specific sales transactions.
Finally, non-operating and extraordinary items such as interest expense and income taxes are subtracted to arrive at net income or the “bottom line.” An income statement might have the following format:
Gross Revenue (or “sales” or “income”)
Less: Returns & Allowances
Equals: Net Revenue
Less: Direct Costs (or “cost of goods sold”)
Equals: Gross Profit
Less: Operating Expenses (or “overhead”)
Equals: Operating Profit
Less: Non-Operating Expenses
Equals Net Income
Next, operating or “general” expenses or “overhead,” such as rent and office supplies are subtracted to arrive at “operating profit.” Operating costs are generally fixed in nature, as they tend not to increase in the short-term. For example, a company’s rent often remains the same for months or years at a time. Similarly, operating costs such as rent are not directly tied to any specific sales transactions.
Finally, non-operating and extraordinary items such as interest expense and income taxes are subtracted to arrive at net income or the “bottom line.” An income statement might have the following format:
Gross Revenue (or “sales” or “income”)
Less: Returns & Allowances
Equals: Net Revenue
Less: Direct Costs (or “cost of goods sold”)
Equals: Gross Profit
Less: Operating Expenses (or “overhead”)
Equals: Operating Profit
Less: Non-Operating Expenses
Equals Net Income
Posted by Ken Pirok at 6/3/2008 12:19 AM 
Categories: Gross Profit,Operating Expense,Income Statement,Cost of Goods Sold
Categories: Gross Profit,Operating Expense,Income Statement,Cost of Goods Sold
Need some examples of actual income statements to look at!
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A sample income statement is here, and a sample common size income statement is here.
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