How to create an income statement for your business

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How to create an income statement for your business

Creating a revenue statement as well as a balance sheet is very crucial for any business. A income statement is an accounting/financial statement term that displays profitability at a given time, as newer technologies lead to increased change in the business world, it becomes mandatory to effectively make a good tax return .

For example, you can use Microsoft Excel to prepare a good and efficient document.

Important steps to prepare the income statement

THE means of preparing the income statement Also include single and multi-step methods. Therefore, when creating the financial document, add the following important steps as appropriate.

The revenue section

This shows the cash flow or other things that represent the increase in products as well as all other transactions at a specific time, offering various operations. This is total sales revenue.

The section dealing with expenses

This should show cash outflows or as the name suggests, “expenses”, which reflects the amount of money that was appropriated for a certain business operation. All accounts payable should also be linked to this section as it would reflect cash outflows.

The section dealing with the cost of sales

This represents all the costs attributed to various products produced and then sold by the company. It includes labor costs, additional costs, selling, advertisements and administration areas. Also, this area excludes the running cost.

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Administrative section

So this is the sales section. It may also include payroll expenses. It is so-called non-production costs.

The section dealing with selling expenses

It shows many different products that need to be sold and can include money put on travel, shipping expenses, advertisements as well as salaries.

The research section

This section represents all expenditures in the company’s research programs and includes development programs.

Additionally, the area of the income statement that has the non-operation section should have the following:

      1. Reviews or Earnings – This shows various earnings from other activities that may not be related to the business. It can be rent, goodwill, and other unusual benefits.
      2. Other expenses – All other transactions not related to the main activity. It can be a drop in an exchange rate.
      3. Financial cost – It includes interest, loans and bank charges.
      4. Expense Tasks – The sum of all taxes payable to the authorities.

Ways to create an income statement for your business

Here is a useful list of the main ways to create an income statement .

How to create an income statement for your business
1. Choose a time to prepare the plan and format the income statement
Identify the company name on the top header. Below, the “income statement” must be written. Additionally, specify the period of creation of the statement.
2. Form the body of the income statement
It should have three specific sections which should include:
  • The first row – shows the analysis of the total profit of sales revenue.
  • The second row – shows an analysis of operating income from non-operating income.
  • The third row – shows an analysis of total income using all income and expenses.
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3. Further prepare the total profit section which has the following
  • Sales Revenue – This contains all revenue from the sale of goods, written in one column.
  • Expenses of Goods Sold – This shows the cost of commodities, all expenses, written in a separate column.
  • Total profit section – This shows the total profit of the establishment.
4. Then prepare the income of the operation with the following
  • All operating costs and non-cash expenses as explained above.
  • The total operating costs column which shows the total operating expenses. He should have payroll, insurance, with all the goods supplied.
  • Then the next line should be called operating income, which is income from various functions.
5. Additionally, the non-operation section, in another column, should contain the following
  • Lenders
  • Interest income
  • Losses
6. All types of non-operational expenses should be listed in this section
These contain all activities that are not part of the main activity as explained above:
  • Remove non-operating expenses from non-operating profits considering non-operating income.
  • The total income column is the total amount of income remaining from profit after all expenses.
  • Add non-operating income to operating income. This shows the total money for that period.
7. And last but not least, the remaining net income must be transferred to the remaining earnings
In addition, this leads to a reset of the total balance for the next accounting period.

In conclusion

An income statement is a very important financial document for a business, as we see. It is a great option for startups as it can provide great benefits when starting and operating a new business. Beyond that, it keeps businesses on track and allows owners to monitor all profits and losses in different transactions.

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Our team of experts can help you prepare a Statement of Income, also known as a Statement of Profit and Loss, or a Statement of Income. FinModelsLab Team will help you show your Financial performance to help your business or startup prosper!

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