Income statement

An income statement
An income statement shows a business's profits and losses

An income statement (profit statement) statement shows the profit or loss made by a company over a set period of time.

Income statements show both the gross profit and the net profit made by a company.

There are many reasons why a company would produce an income statement:

  • to calculate the total costs of expenses
  • to calculate the profit/loss made for the year
  • legal reasons (all limited companies are required to produce an income statement)
  • tax reasons (profit needs to be calculated so businesses can accurately calculate their tax payments)
  • to calculate cost of sales
  • to compare with previous years or other companies