An income statement template setup is a really useful thing to know whether you’re a business student or already working in your career. Knowing how an income statement works will be a big benefit to you because it will help you make better business decisions as you go through your career.

The first thing is revenues. Revenues are different than gains, but many people think they’re the same thing. A revenue is money that comes from what the actual business does. If you have a business that sells flowers, then any money generated from selling flowers is revenue.

Gains are different from revenues because they are any money earned from transactions that aren’t related to the business. Let’s say that you decided to buy a new pair of shears for your business, so you sell your old ones. If you sell your old shears for a profit, then you have a gain. It’s a gain and not revenue since you’re not in the business of selling shears.

Another thing you need to be familiar with is expense. Expenses are the costs that you have from simply running your business. The flowers that you buy at wholesale that you’ll end up selling in your shop is a business expense. You have to have expenses to run a business and have inventory.

Something similar to expenses but a little different is a loss. A loss is if you sell some old equipment, but you have to end up selling it for less than it was worth. That is considered a loss, and it’s different from an expense because it doesn’t happen regularly in your business.

The basic format of any income statement example can be summarized as revenues minus expenses equal net income. If you can remember that you’ll always be able to format an income statement.

Another thing about income statements that you need to remember is that they cover a specific time period, unlike the balance sheet. They usually cover a period of one year or one quarter.

Keeping this tips in mind will help you throughout your career, and even if you go on to being an actual accountant once you’re don with college.

You can learn more about an sample income statement by visiting our website. You can view more accounting tutorials and tips at our partner website, accounting101.org.