Income Statement | Format | Types | Example

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Income Statement

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Financial Accounting

Income statement (also referred to as (a) statement

Financial Accounting Intro

of income and expense or (b) statement of profit or

Accounting Principles

loss or (c) profit and loss account) is a financial

Accounting Cycle

statement that summaries the results of a companys

Financial Statements

operations for a period. It presents a picture of a

Income Statement

companys revenues, expenses, gains, losses, net

Single-Step Income Statement

income and earnings per share (EPS).

Multi-Step Income Statement

Together with balance sheet, statement of cash flows

Income Statement by Nature

and statement of changes in shareholders equity,

Income Statement by Function

income statement forms a complete set of financial

Discontinued Operations Income

statements.

Comprehensive Income
Earnings per Share (EPS)

Format

Operating Segments
Statement of Retained Earnings

A typical income statement is in report form. The

Balance Sheet

header identifies the company, the statement and

the period to which the statement relates, the reporting currency and the level of rounding-off. The header is

Extraordinary Items

followed by revenue and cost of goods sold and calculation of gross profit. Further down the statement there is

Statement of Cash Flows

detail of operating expenses, non-operating expenses, and taxes and eventually the statement presents net

Operating CF: Direct Method

income differentiating between income earned from continuing operations and total net income. In case of a

Operating CF: Indirect Method

consolidated income statement, a distribution of net income between the equity-holders of the parent and

Investing Activities Cash Flow

non-controlling interest holders is also presented. The statement normally ends with a presentation of earnings

Financing Activities Cash Flow

per share, both basic and diluted. Important line items such as revenue, cost of sales, etc. are cross-referred to

Statement of Changes in Equity

the relevant detailed schedules and notes.

Notes and Other Disclosures

Manage. Discussion & Analysis

Types

Changes in Accounting Principles

There are two types of income statements: single-step income statement, in which there are no sub-totals such
as gross profit, operating income, earnings before taxes, etc.; and multi-step income statement, in which similar

Changes in Accounting Estimates

Correction of Accounting Errors

expenses are grouped together and intermediate figures such as gross profit, operating income, EBIT, etc. are

Subsequent Events

calculated.

Cash and Cash Equivalents

Another classification of income statement depends on whether the expenses are grouped by their nature or
function. Income statement by nature classifies expenses according to their nature i.e. without allocating them to
different business activities, while income statement by function classifies expenses according to the business
operations that they support. For example, income statement by nature shows line items such as salaries,
depreciation, rent, etc., while income statement by function allocate salaries, depreciation, rent, etc. between
cost of good sold, selling expense, general and admin expenses, etc.

Receivables
Inventories
Non-Current Assets
Investments
Revenue Recognition
Employee Benefits
Lease Accounting

Example: Template

Shareholders' Equity

Below is a sample income statement. The first five lines make the header followed by a multi-step overview of
expenses. All amounts other than EPS are in million USD.

Long-term Liabilities
Partnership Accounting
Business Combinations
Financial Ratio Analysis

IS Global, Inc.

Specialized Ratios

(Consolidated) Statement of Income and Expense

for the year ended 31 December
Notes

2013

2012

Revenue

14

201.9

182.1

Cost of sales

15

(158.4)

(151.6)

43.5

30.5

Gross profit
Selling and distribution expenses

16

(9.8)

(8.9)

General and administrative expenses

17

(14.0)

(11.0)

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IS Global, Inc.

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and Expense

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31 December

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Notes

2013

2012

Other operating income and gains

18

1.8

2.6

Other operating expenses and losses

19

(3.4)

(1.3)

18.1

11.9

Operating profit/earnings before interest and taxes (EBIT)

Interest income

20

1.3

0.6

Interest expense

20

(3.6)

(2.8)

Net interest expense

20

(4.9)

(3.4)

Profit from investments under equity method

22

6.9

5.5

20.1

14.0

(6.0)

(4.2)

14.1

9.8

Earnings before taxes

Income taxes

23

Income from continuing operations

Income from discontinued operations

24

2.1

3.1

Net income

17

16.2

12.9

14.6

11.6

1.6

1.3

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Distribution of net income:

Equity-holders of parents
Non-controlling interest-holders
Earnings per share:

19

Basic, attributable parent

0.15

0.12

Diluted, attributable to parent

0.15

0.11

Basic, from continued operations, attributable to parent

0.14

0.10

Diluted, from continued operations, attributable to parent

0.14

0.09

Components
Following are key line items that appear on a typical income statement:
Revenue: represents the amount earned by the company in exchange of goods it supplied and services
it provided. When there are few sources of revenue, a breakup may appear on the face of the income
statement; otherwise, a separate note provides a complete picture.
Cost of sales: represents the cost of goods sold and services provided. It includes all such costs that
can be traced or assigned to goods sold or services provided. Examples include raw materials, salaries of
factory or service shop employees, manufacturing facility rent, depreciation of manufacturing equipment,
lease rentals on equipment used in manufacturing or service delivery, indirect materials needed for
production, etc. Typically, a separate note provides a complete break-up of cost of sales.
Gross profit = revenue cost of sales; it represents the profit earned on the goods and services of the
company before any selling, general and administrative expenses and finance costs are accounted for.
Operating expenses: mainly include selling and distribution expenses and general and administrative
expenses. Examples include salary of the CEO, marketing expenses, office rent, salaries of administrative
staff, fuel for delivery vehicles, etc.
Operating profit: (equivalent to earnings before interest and taxes (EBIT)) = gross profit operating
expenses; as the name suggests, it is the profit after cost of sales and all operating expenses have been
charged to revenue. It is before any adjustment for interest or investment income and interest expense
and taxes.
Income from continuing operations = EBIT taxes; it represents the net income (i.e. after-tax
income) earned from business components that the company intends to own in the future. It excludes
any income earned during the year from business components that are treated as discontinued
operations. Income from continuing operations provides a picture of the companys continuing earning
capacity.
Income from discontinued operations: is the after-tax income of business components which the
company has disposed-off during the year or has classified as held-for-sale at the year-end.
Net income = income from continued operations + after-tax income from discontinued operations; a
companys total net income includes income from both continued operations and discontinued
operations. It represents the income earned during the year after accounting for all expenses. It is
carried to statement of changes in shareholders equity where it is added to opening balance of the

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