Income Statement Accounts

which accounts are found on an income statement

Income statements are also carefully reviewed when a business wants to cut spending or determine strategies for growth. This income statement shows that the company brought in a total of $4.358 billion through sales, and it cost approximately $2.738 billion to achieve those sales, for a gross profit of $1.619 billion. While the definition of an income statement may remind you of a balance sheet, the two documents are designed for different uses.

To understand the above formula with some real numbers, let’s assume that a fictitious sports merchandise business, which additionally provides training, is reporting its income statement for a recent hypothetical quarter. Liabilities are your business’s debts, including accounts payable and notes payable. Like income statement accounts assets, liabilities are split into current and long-term categories. Current liabilities have due dates within the next year, and long-term liabilities are due farther in the future. An income is a hefty source of data and information about all the crucial factors that cater to the profits of a business.


The applications vary slightly from program to program, but all ask for some personal background information. If you are new to HBS Online, you will be required to set up an account before starting an application for the program of your choice. Next, analyze the trend in the available historical data to create drivers and assumptions for future forecasting. For example, analyze the trend in sales to forecast sales growth, analyzing the COGS as a percentage of sales to forecast future COGS. Finally, we arrive at the net income (or net loss), which is then divided by the weighted average shares outstanding to determine the Earnings Per Share (EPS).

  • However, instead of doing it all in one tax year, you write off parts of it over time.
  • While gains can be considered secondary revenue, the concepts of the two terms are quite different.
  • For example, some investors might want stock repurchases while other investors might prefer to see that money invested in long-term assets.
  • These three statements together show the assets and liabilities of a business, its revenues and costs, as well as its cash flows from operating, investing, and financing activities.
  • This means the $600 debit is subtracted from the $4,000 credit to get a credit balance of $3,400 that is translated to the adjusted trial balance column.
  • Specialties include general financial planning, career development, lending, retirement, tax preparation, and credit.

This metric is used to determine how much profit a company generates for each unit of its stock. The earnings per share is calculated by dividing the net income by the number of shares outstanding. Whenever a company plans to sell part of its operations in the future, that aspect of the company is said to be held-for-sale.

Balance sheet and Income Statement Similarities

When a company sells cars, the operating revenue would be the money earned from the sales of the cars. For a laundry service company, the money realized from washing and cleaning is the operating revenue. The statement of comprehensive income includes all sources of revenue and expense, including investing and financing activities. Unrealized gains from investments are recorded in the statement of comprehensive income; the same applies to losses. Treat the income statement and balance sheet columns like a double-entry accounting system, where if you have a debit on the income statement side, you must have a credit equaling the same amount on the credit side. Once we add the $4,665 to the credit side of the balance sheet column, the two columns equal $30,140.

which accounts are found on an income statement

Ending retained earnings information is taken from the statement of retained earnings, and asset, liability, and common stock information is taken from the adjusted trial balance as follows. It shows you how much money flowed into and out of your business over a certain period of time. If your business owes someone money, it probably has to make monthly interest payments. Your interest expenses are the total interest payments your business made to its creditors for the period covered by the income statement. These expenses are listed individually here, but some income statements will bundle these and other similar expenses together into one broad category called “Selling, General & Administrative Expenses” (SG&A).

General expenses

Below is a portion of ExxonMobil Corporation’s cash flow statement for fiscal year 2021, reported as of Dec. 31, 2021. After calculating income for the reporting period, determine interest and tax charges. Below is a video explanation of how the income statement works, the various items that make it up, and why it matters so much to investors and company management teams.

  • Indirect expenses like utilities, bank fees, and rent are not included in COGS—we put those in a separate category.
  • It is called a “multi-step” income statement because it breaks down the operating activities into different steps.
  • The gain on an income statement represents the money made by a business from unusual sources or irregular sources other than the main business activity.
  • When one of these statements is inaccurate, the financial implications are great.
  • Advertising expenses are nothing but the costs of marketing that you need to enlarge the client base.

Interest expense would be reported on the income statement as the total amount of money that has been spent on repaying loans or debt during the reporting period. Earnings Before Taxes (EBT) or Income before taxes would be reported on the income statement as the income realized after deducting the expenses from the revenue. To be included on the statement of financial performance, an account should be able to make an income or incur an expense; or it should generate gains or cause losses to a company. The operating revenue on income statement is the money earned from a company’s main products or services.