There is no debating the fact that an income statement is a very important document whether you are a salaried individual or a businessman. And there's always a fixed format to do things like these, as it helps other people understand the report better. Here is a template to simplify the task of preparing an income statement.
An income statement consists of two parts showing revenue and expenses. The first thing you need to do is divide the page vertically into two sections meant for both these parts. Make three columns in each section with headings such as Particulars, Debit ($) and Credit ($). Once done, you can start posting your financial entries. Here is how an income statement should look.
|Particulars||Amount ($)||Total ($)|
|Printing and Stationery||xx|
Facts About Income Statements
- It is supposed to be a detailed statement about the various incomes and expenses of the business. It is not just mandatory, but it also helps people understand cash flow or where exactly the money is being spent.
- As previously mentioned, income statements help to understand how money flows in and out of business. This helps to control cost and expenditure, if they are unusually high.
- It can also help you analyze the incomes and expenses of the business as compared to those of the previous financial year, monitor the progress and correct the decline, if any.
- An income statement is considered to be an important document for taxation purposes as per Internal Revenue Service (IRS) rules. Since it involves calculations of income tax based on net revenue or profit, the income statement needs to be prepared.
As you can see, the income statement isn't too difficult to prepare. All you have to do is add all the particulars of different accounts under each head and then enter the amounts pertaining to each account. Basically, it should be lucid and easy to update. I hope the template given in this article will simplify your task of preparing the income statement.