Question

Respond to the following in a minimum of 175 words:

What is the purpose of an income statement, and who is the audience for this document? What components do income statements typically contain? Why?

Answer 1

Income statement:

Income statement is a part of financial statements of an entity, which comprises of revenue and expenses of an organization during a particular period. The result of the income statement is Net Profit or Loss during a period.

The purpose of income statement is to know about whether the entity in a profitable position in a particular year. The audience of the income statement are employees about there employee benefits, Government about taxes and statutory dues, Owners about profitable, and other persons who interested in income statement.

Income statement consist of different elements such are, Sales, Cost of goods sold, Gross profit, administrative Expenses, selling and distribution expenses, depreciation and amortization, earnings before interest and taxes, Interest expenses, earnings before taxes, taxes and duties, and Earnings after tax, (Preferred dividend, Earnings per share in case of companies)

A complete presentation of income statement helps in comparison with previous years and with other entities.