INCOME

STATEMENT

THE INCOME STATEMENT

Shows the results of a company’s operations over a period of time.

What goods were sold or services performed that provided revenue

for the company?

What costs were incurred in normal operations to generate these

revenues?

What are the earnings or company profit?

Income Statement Format

An additional financial statement that identifies changes in retained earnings from one accounting period to the next.

STATEMENT OF RETAINED EARNINGS

Beginning retained earnings+ Net income– Dividends paid

= Ending retained earnings

Net income results in:Increase in net assetsIncrease in retained earningsIncrease in owners’ equity

Dividends result in:Decrease in net assetsDecrease in retained

earningsDecrease in owners’ equity

Income Statement

• Single-step• All operating revenues and gains are reported first,

followed by all operating expenses and other losses.• No separate section is prepared for COGS and gross

profit.

• Multiple-step• Divided into separate sections, various subtotals are

reported.• Involves separate sections for gross profit, operating

income, other income/losses, income before income taxes, and net income.

Gross ProfitOperating

IncomeOther Income/losses

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