An income statement is one of the three primary financial statements that report on the financial performance of a company during a certain accounting period. It is also known as a profit and loss statement (P&L), profit or loss statement, statement of financial performance, statement of operations, or earnings statement. This document provides an overview of the company's income and expenses for a given period, and indicates how revenues are transformed into net income or net benefits. Pre-tax earnings (also called pre-tax income) are the amount of money left over after subtracting all expenses and losses from all income and profits.
It is common for companies to divide interest expenses and interest income as a separate item in the income statement. Following the revision of IAS 1 in 2003, the Standard now uses profits or losses for the year instead of net gains or losses or net income as a descriptive term for the final result of the income statement. An income statement is a valuable source of information on the key factors responsible for a company's profitability. Lenders, investors and other partners use the income statement to evaluate their financial performance and make decisions that may affect the future of their company. For instance, recurring rental revenues earned by placing billboards in the company's factory along a highway demonstrate that management is capitalizing on available resources and assets for additional profitability. The names and use of the different accounts in the income statement depend on the type of organization, industry practices and the requirements of different jurisdictions.
Anything below operating income is not related to the continued operation of the company, such as non-operating expenses. Earnings per share (EPS) should be disclosed on the front of the income statement. In conclusion, an income statement is an essential document that provides insight into a company's financial performance. It is used by lenders, investors, and other partners to evaluate their financial performance and make decisions that may affect their future. It also provides information on how revenues are transformed into net income or net benefits.