Understanding Financial Documents: Income Statement
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There are a number of different types of basic financial documents that a small business owner needs to understand. One of these is the Income Statement. The Income Statement shows what your sales adn expenses are and whether you made a profit over a specific period. The following is an example of a simple income statement, which shows the revenues (or sales) and expenses (cost of doing business). The difference between sales and the cost of goods sold is your gross profit. The difference between gross profit and operating expenses is your net income, or bottom line. 
The next sample Income Statement is more complex. It shows income over the course of a full year for a small business, with a greater diversity of expenses, including depreciation expenses, interest expenses and income taxes. 
We can also look at a comparative comparative income statement. This type of sheet is a useful tool for financial analysis, as you can compare the results from your business over multiple years. The next sample is a comparitive year-end income statement that has results from two consecutive years. 
Lastly we look at a type of comparative income statment that uses a Vertical Percentage Analysis. This shows each item as an amount as well as a percentage of sales. The percentages help you to analyze the changes in the income statement itmes over time. 
The above information is made available through: CreativeCommons.org  Derivative by Athivia College (2010), Original materials: Collins, Karen., Exploring Business. Retrieved Apr 8, 2010 from http://www.flatworldknowledge.com/node/123782 . Collins, Karen. Exploring Business. 1969 . Flat World Knowledge. 8 Apr, 2010. |
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