Debitoor Dictionary

Accounting terms explained in a simple way

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Income statement - What is an income statement?

An income statement shows a company’s revenues less their costs and expenses over a given period (e.g. a financial year or one month)

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An income statement (also commonly known as a profit & loss statement, or P&L) is an integral component of a company’s financial statements, along with other reports such as the balance sheet.

It shows how a company’s revenue is converted into net income: first by displaying the revenues recognized for a specific period, and then by subtracting the costs and expenses from these revenues (including write-offs and taxes).

The results of an income statement show a company’s net income (or net loss). What this means for the business is an indication of how profitable it has been over the given period.

The income statement is also used in order to show internal and external company stakeholders whether the company made or lost money during the reporting period.

Income statement format

A typical income statement shows a company's revenues, followed by their cost of goods sold, their expenses, and any other sources of income (other than daily sales, e.g. the revenue from a one time sale of a factory). It concludes with the company's net income for the period.

Positive values (revenues) are expressed as whole numbers with no additional text, while negative values (losses) are indicated by being wrapped in parentheses, e.g. (1,000).

It's important to note that an income statement expresses the financials over the course of a specified period of time (as opposed to the balance sheet, which shows just a single moment in time).

This is why every income statement will include a statement near the top that is similar to: "For the period of: dd/mm/yyyy - dd/mm/yyyy" across the top.

Income statement as a success indicator

The goal of the income statement is to describe how successful the operations of the business are. The main objective is to make a profit, and the statement displays the extent to which this objective has been successful.

Income statement and Debitoor

In the larger Debitoor plans, you have access to several reports including your VAT report, balance sheet and the profit & loss (income statement). Because Debitoor accounting & invoicing software has been designed to be intuitive and easy to use, these reports can be generated and customised with just a click!