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Income statement

Income statement is the financial report measuring performance over a defined period by subtracting all costs from revenue to arrive at net income or net loss.

Also known asprofit and loss · P&L

ByHoang TruongUpdated

See it move

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A waterfall chart begins at revenue of €200,000 and steps downward through four successive cost deductions: cost of goods sold (€120,000), operating expenses (€45,000), interest (€5,000), and tax (€7,500). Each descending bar lowers the running total until net income settles at €22,500 at the foot of the chart. The falling sequence makes visible exactly how much each line item consumes from the original revenue figure before the final profit is reached.

Where it fits
SubjectFinancial AccountingCoreTopicThe Financial StatementsCoreTopicRevenue, Expenses & ProfitCore

The formula

LaTeX
Gross Profit=Revenue−Cost of Goods Sold\text{Gross Profit} = \text{Revenue} - \text{Cost of Goods Sold}
LaTeX
Operating Income=Gross Profit−Operating Expenses\text{Operating Income} = \text{Gross Profit} - \text{Operating Expenses}

Variables

Selling, general and administrative costs not included in COGS (€)
LaTeX
Net Income=Operating Income−Interest Expense−Income Tax\text{Net Income} = \text{Operating Income} - \text{Interest Expense} - \text{Income Tax}

The three-step income statement cascade from revenue to net income.

Check yourself

PracticeCORE

Which of the following does an income statement report, but a balance sheet does NOT?

Select an answer to check your understanding.