This calculation shows investors and creditors the overall profitability of the company as well as how efficiently the company is at generating profits from total revenues. The income statement calculates the net income of a company by subtracting total expenses from total income. The income statement is the first financial statement typically prepared during the accounting cycle because the net income or loss must be calculated and carried over to the statement of owner’s equity before other financial statements can be prepared. The income statement, also called the profit and loss statement, is a report that shows the income, expenses, and resulting profits or losses of a company during a specific time period.
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