Yes, an income statement, otherwise known as a profit and loss (P&L), is a record that measures and shows all the revenues and expenses a company incurred during a specific period of time. The income statement helps determine a company’s financial health and the financial progress it made during a particular period. The income statement contains sections for revenue and expenses, which include net sales, gross profit, cost of goods sold, selling expenses, general and administrative expenses, and net profit.
A simple income statement template can help you create this financial document with information from your own company’s finances.
The income statement is used both internally and externally for different purposes. Internally, the income statement can be viewed at the corporate level, department level, product level or even customer level.
By evaluating the income statement at each level, the company can gain insightful understanding of how profitable a product, customer relationship or department is and adjust as needed.
The income statement is considered one of the most important financial statements due to the amount of information that can be pulled out of it. Externally, the income statement is used by investors, creditors, and stakeholders to understand how the company is making money and how they are allocating the revenue.
The income statement acts as the first impression to investors and creditors as a proof of business success or failure.
Using an income statement template offers several advantages for small businesses:
If you’re uncertain about financial reporting or have complex accounting needs, consulting with a qualified accountant or financial professional is recommended.
Here’s how to do an income statement in Excel:
Step 1: Download income statement Excel template.
Step 2: Determine the period of time for the income statement (monthly, quarterly, yearly).
Step 3: Export trial balance from accounting system for the specified period.
Step 4: Enter data into the income statement template.
Step 5: Calculate net income.
You can find more detailed instructions on how to use our income statement template when you download the template.
It’s recommended that businesses prepare and review monthly income statements to evaluate performance and make adjustments as needed to stay on track with financial budgets and goals.
An income statement template helps businesses get started on their financial reporting with consistency and accuracy. By providing a customizable framework, the template guides you through the necessary sections to ensure every income and expense is properly recorded.
Once the template is filled out, you’ll see how profitable the business is and get insight on what’s driving performance. With this information, you’ll have a strong foundation that can be referred back to for optimizing costs and maximizing profits.
An income statement is typically broken up into three sections:
While an income statement has three main sections, each section is packed with its own valuable information and line items.
The most common components included in an income statement are:
The income statement formula is:
Total Revenue - Total Expenses = Net Income
This mirrors the income statement structure that segments your transactions into each of the two sections with net income being what’s left over. It’s an easy calculation that’s done simply by updating the information on the income statement template.
Income statements and balance sheets are the two fundamental reports that businesses use to understand their financial health, but they look at the finances in two very different ways.
The income statement is a summary of transaction totals grouped by income or expense type for a specific period of time. You’d look at your income statement to answer questions like how profitable a business was, what it spent its money on, and how efficiently it’s turning sales revenue into profit.
The balance sheet is a snapshot in time of how much cash is held and owed. You’d look at your balance sheet to answer questions like how much cash it holds, whether the cash level is high enough to cover debts, and what’s been paid out to shareholders.
Both should be updated and analyzed regularly to keep a pulse on how strong a business is performing.
A multi-step income statement separates income and expenses into operating and non-operating categories. It takes additional work to prepare, but offers greater detail into how a business is generating and spending its money.
Some examples of non-operating activity are interest earned, interest expenses on a liability, or any gain or loss on the sale of an asset or investments.
You may want to prepare a multi-step income statement if you’re dealing with non-operational activity that makes it difficult to understand just how profitable your core operations are.
Some examples of when you should prepare a multi-step income statement are when you’re juggling multiple liabilities, liquidating old assets, or looking to showcase the profitability of your core operations to investors.
Yes, download our income statement Excel template. Then in Google Sheets, follow these steps: