Income Statement: Meaning, Format & Examples

Income Statement - Feature Image

Income Statement:-

Income Statement shows the all expenses incurred and revenue earned during the particular period. It is prepared to find out the Net Earning of the business for the particular accounting period. It is also known as Profit and loss account/statement.

The income statement is one of all three financial statements. these are Income Statements, Balance sheet and Cash flow statement. The income statement represents the actual earning of the company for a particular period of time. The period will be mentioned in it like Income statement is as on 30 September 2018. (also check Difference between the Profit and Loss Account (Income Statement) and Balance Sheet)

 

The focus of Income Statement: –

The income statement has focused on the nominal account only means revenue, expenses, loss and gains. It is an accrual-based statement. It shows total expenses due or not only paid and income earned or not only received for the particular period. Further Explanation of these terms are shown below: –

  1. Revenue/Income
  2. Expenses
  3. Loss
  4. Gain

1. Revenue/Income : –

Revenue/income is the amount which a company earned during the particular period. It can be further divided into two parts: –

  1. Operating Revenue/Income
  2. Non-Operating Revenue/Income

Operating Revenue/Income: –

Operation Revenue/Income those revenues which are earned by business from its primary activities. Like revenue earned from the sale of their goods and services. Example, the operating revenue for the manufacture of shoes is that which he will be earned from the sale of shoes.

Non-Operating Revenue/Income: –

Non-Operation Revenue/Income those revenues which are earned by business from its secondary activities. Like revenue earned from the bank in the form of interest on the bank balance, rent received from the tenant. It means all that income which is separate from the sale of goods and services.

2. Expenses: –

Expenses are the amount which a company spent during the particular period to earn revenue. It can be further divided into two parts: –

  1. Operating Expenses
  2. Non-Operating Expenses

Operating Expenses: –

Operation Expenses are those Expenses which are spent by business on its primary activities. Like expenses met on the purchase of their goods and services. Example, the operating expenses for the manufacture of shoes is that which he will be paid for the purchase of raw material for the manufacturing shoes. All other expenses met on conversion of this raw material into the finished product i.e. shoes. Examples, Factory lighting, Repair and maintenance of Plant and machine, Salary of employees, Selling and distribution of product etc.

Non-Operating Revenue/Income: –

Operation Expenses are those Expenses which are spent by business on its secondary activities. Like Interest paid on loan, Charges for obsolescence of assets or currency exchange are also non-operating expenses.

3. Losses: –

All money spent on unusual events are known as losses. Like, Sale of old assets on price less than book value and claims paid against lawsuits.

4. Gains: –

All money earned on unusual events are known as Gains. Like, Sale of old assets on price more than book value and claims received against lawsuits,

The format of Income Statement: –

In simple, in the income statement, we have deducted total expenses and losses from the total revenues and gains. i.e. Net income = Total Income(Revenue + gains) –  Total Expenses(Expenses + loss). 

The presentation of income statement may vary from country to country. The example of it shown below: –

Name of the Company 
Income Statement for the (year, quarter or month) end __________
Details Amount
Revenue
Sale of Product 500,000
Interest received on Bank balance 40,000
540,000
Expenses
Material consumed in the manufacturing process 250,000
Wages  30,000
Salary  50,000
Rent 10,000
Selling and Distribution  15,000
loss on Sale of an assets  1,000
356,000
Net Income = Revenue- Expenses  184,000

 

In the above Example, The total amount received from the operating activities, non-operating activities and gains are equal to 540,000/- and The total amount spends on operating activities, non-operating activities and losses are equal to 356,000/-. So, we get 184,000/- as our net income after deduction total expenses from the total income. it is a simple presentation of the income statement to understand the basic calculation of the income statement.

Example of Income Statement of the listed Company – Reliance Industries Limited: –

Data Collected from Yahoo! Finance

Reliance Industries Limited 
Income Statement
All numbers in thousands
Revenue 3/31/2018 3/31/2017
Total Revenue 4,08,26,50,000         3,29,94,00,000
Cost of Revenue         2,86,20,90,000         2,38,81,80,000
Gross Profit         1,22,05,60,000            91,12,20,000
Operating Expenses
Research Development  –   – 
Selling General and Administrative              9,66,10,000              8,43,50,000
Non Recurring  –   – 
Others            48,05,30,000            36,04,00,000
Total Operating Expenses         3,60,62,90,000         2,94,93,90,000
Operating Income or Loss            47,63,60,000            35,00,10,000
Income from Continuing Operations
Total Other Income/Expenses Net              1,79,00,000              5,03,30,000
Earnings Before Interest and Taxes            47,63,60,000            35,00,10,000
Interest Expense             -7,24,60,000             -3,15,70,000
Income Before Tax            49,42,60,000            40,03,40,000
Income Tax Expense            13,34,60,000            10,20,10,000
Minority Interest              3,53,90,000              2,91,70,000
Net Income From Continuing Ops            36,08,00,000            29,83,30,000
Non-recurring Events
Discontinued Operations  –   – 
Extraordinary Items  –   – 
Effect Of Accounting Changes  –   – 

Other Items

 –   – 
Net Income          36,07,50,000          29,90,10,000
Preferred Stock And Other Adjustments  –   – 
Net Income Applicable To Common Shares          36,07,50,000          29,90,10,000

If you want to Download the statement please download the following image: –

Example of Income Statement of lisited company 210x300 - Income Statement: Meaning, Format & Examples

 

Thanks for reading the topic of Income Statement, please comment your feedback whatever you want. If you have any question please ask us by commenting.