An income statement (also called a profit and loss statement or P&L) is one of the main financial statements. It shows a company’s financial performance over a specific period (month, quarter, or year).
It answers the key question: “Did the business make a profit or a loss?”
Key Components of an Income Statement
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Revenue (Sales/Income)
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Total money earned from selling goods or services.
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Cost of Goods Sold (COGS)
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Direct costs of producing goods or services (materials, labor, etc.).
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Gross Profit
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Revenue – COGS.
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Shows how efficiently a company produces goods/services.
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Operating Expenses
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Costs of running the business (rent, salaries, marketing, utilities, etc.).
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Operating Income (EBIT)
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Gross Profit – Operating Expenses.
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Other Income & Expenses
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Things not directly related to operations (interest, investment income, foreign exchange gains/losses).
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Net Income (Profit or Loss)
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The “bottom line”: total earnings after all expenses and taxes.
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Example (Simplified)
Revenue: $500,000
COGS: $200,000
➡️ Gross Profit: $300,000
Operating Expenses: $150,000
➡️ Operating Income: $150,000
Taxes & Other Expenses: $30,000
➡️ Net Income: $120,000
