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 and expense for the period stated.

The Basic information on an Income Statement is the businesses’ revenue, expense, and profit / loss.

In short, revenue is the total income that a business receives. When summarized on an income statement the revenue is typically broken down into sub-categories or displayed on multiple lines in order to easily convey whether the income was derived from normal business operations or not.

Expense can be defined on an income statement simply as the businesses’ trade of value or money from the business to a different entity. Just as revenue, expenses are similarly categorized on an Income Statement. For example, Cost of Goods Sold should only reflect 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. Calculator is a free Excel-like product from OpenOffice that can be configured to provide the data to prepare these statements.

3. Quick books is a popular 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 but you will need to utilize the cash flow statement and balance sheet to give a full picture of the company’s health.

In conclusion, a financial statement is a helpful tool to determine if the business is a good company to buy in terms of investing in its stocks. It is the representation of the income status of the business and the gives the over-all performance made by the business in a particular period.