An income statement, otherwise known as a profit and loss statement, basically adds an itemized list of all your revenues and subtracts an itemized list of all your expenses to report net profit or loss for the period. You will gain a better understanding of the results of operations and the quality of your earnings.
An income statement provides you the information to...
· Track revenues and expenses so that you can determine the operating performance of your business.
· Determine what areas of your business are over-budget or under-budget.
· Identify specific items that are causing unexpected expenditures.
· Track dramatic increases in product returns or cost of goods sold as a percentage of sales.
· Manage your income tax liability.