Income Statement

The income statement reports a company's income or loss for a specific period.  It lists revenues and subtracts from them the period's expenses. A positive balance results in an income and a negative balance indicates a loss.  In the example below revenues of $6,000 minus expenses of $3,000 results in a net income of $3,000. This figure is used on the Statement of Owner's Equity.

There are two formats commonly used to prepare income statements - the single-step and multiple-step. The example above is a single-step income statement. It consists of just two sections: revenues and expenses. Expenses are deducted from revenues in a single-step to find net income or loss.

In a multiple-step income statement, the results of transactions are shown in sections separating operating activities from non-operating activities. In addition, it classifies expenses by function. For example, selling expenses are shown separate from administrative expenses. If the company experienced extraordinary items or discontinued a segment of operations, they are also shown in different sections.

For professionally created examples of single- and multiple-step income statements for corporations and sole proprietorships, we recommend The Master Set of 80 Business Forms. The set includes filled-in forms designed to give you a complete understanding of how each form works as well as blank forms for use in your own business or for practicing income statement preparation.