An income statement which some call a profit and loss statement measures profitability and recognizes revenues when they are realized or when the service is rendered. The income statement provides a summary of a business’s revenue (sales) and expense for the time period stated.

Basically the information found on a business Income Statement is revenue, expense, and profit / loss.

Revenue can be defined as the total income that an organization receives. The revenue is generally further broken down into sub-categories or displayed on different lines based on whether the income was derived from normal business operations or not.

Expense can be defined on an income statement as the outflow of money or value from the business to another entity. Expenses are broken down in much the same way as revenue on an Income Statement. For example, Cost of Goods Sold (COGS) only reflects the direct cost or expense of producing the businesses’ product or service, while your administrative costs would be on a different line.

1. Microsoft Excel can be setup to provide the data for these statements.

2. Calc is a free Excel-like product from OpenOffice that can be configured to provide the data to prepare these statements.

3. Quickbooks is probably the most widely used Small Business accounting program that can be used to provide these statements.

By using the data provided by the Income Statement you can determine whether the company is profitable (more value coming into your business than going out) but you will need to utilize the cash flow statement and balance sheet to give a full picture of the company’s health.

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