Income Statement

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).

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It answers the key question: “Did the business make a profit or a loss?”

Key Components of an Income Statement

1. Revenue (Sales/Income)

   • Total money earned from selling goods or services.

2. Cost of Goods Sold (COGS)

   • Direct costs of producing goods or services (materials, labor, etc.).

3. Gross Profit

   • Revenue – COGS.

   • Shows how efficiently a company produces goods/services.

4. Operating Expenses

   • Costs of running the business (rent, salaries, marketing, utilities, etc.).

5. Operating Income (EBIT)

   • Gross Profit – Operating Expenses.

6. Other Income & Expenses

   • Things not directly related to operations (interest, investment income, foreign exchange gains/losses).

7. Net Income (Profit or Loss)

   • The “bottom line”: total earnings after all expenses and taxes.

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