Question

• Define and explain what is an Income Statement.
• What is the nature of the Income Statement? Please give an example by reviewing the Income Statement of any corporation and sharing it through the platform. Does the organization have more Expenses than Revenue - List the Expenses of the organization?

Answer 1

Income statement: It is a statement which shows the details of revenue and expenses of business during a particular period. The Income Statement (also called as Profit or Loss Statement) also states the profit / loss earned by a business during a particular period of time. This statement is prepared for a period of time instead of as on date.

An income statement is one of the essential statements prepared for judging the financial position of the company. The other essential statements being Balance Sheet and statement of Cash Flows.

The income statement in its very nature is a statement which comprises of the following four elements:

1. Revenue from business: Shows the Receipts from the business activity.
2. Expenses of business: Shows the Expenses in the business activity.
3. Gains from business: Shows the excess of revenue over expenses.
4. Loss from business: Shows the excess of expenses over revenue.

Example of an Income Statement / Profit or Loss statement:

ABC Garments Pvt. Ltd.
Income Statement for the period ended March 31, 2019
Particulars	Amount ($ in '000)
Revenue:
Revenue from sale of garments	56,800.00
Commission received	2,600.00
Total Revenue (a)	59,400.00
Expenses:
Cost of Goods sold	42,400.00
Salary	3,700.00
Rent	2,300.00
Interest Paid	3,200.00
Transportation	2,100.00
Electricity	800.00
Total Expenses (b)	54,500.00
Net Income / (loss) = (a) - (b)	4,900.00

As per the above mentioned Income Statement, the total revenue from operations is $59,400 which comprises of receipts from business. The total expenses amounted to $54,500 which is the cost of running the business. Thus, the excess of revenue over expenditure amounts to $4,900 which is the income from running the business.

The expenses of the organization includes the following:

Cost of Goods sold	42,400.00
Salary	3,700.00
Rent	2,300.00
Interest Paid	3,200.00
Transportation	2,100.00
Electricity	800.00