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The Income Statement
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The Income Statement (or Profit and Loss Account) is basically the organisation’s record of sales and costs for a specified period of time, usually a month, quarter or year. The bottom line of the Income Statement is the bottom line of the organisation or the net profit or loss.
The simplest equation to describe an Income Statement is:
The Income Statement does not include capital transactions such as investments, fixed assets or borrowing; however, it does include the current income and costs related to these items such as interest and depreciation.
The diagram below illustrates a typical format of an Income Statement:
A typical format of an Income Statement
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Watch the video below and read it together with the handout above. We advise that as you go through the video, make notes and check your understanding.
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