Investing for beginners

What is an Income Statement

Income Statement

It is said that ‘never judge a book by its cover’. However, a company can always be judged by its financial statements. The financial statements of a company are like a window to all its happenings. They not only present profitability as well as working status but also highlight the future goals and aspirations. Therefore, the first judge to the success of any company shall always be its financial statements. Financial statements basically comprise of three statements: Balance sheetIncome statement and cash flow statement. Apart from these, other additional statements that are also a part of the group are Changes in equity and Notes to Accounts.

The income statement of a company talks about all the major expenses and incomes incurred and are usually repetitive in nature. Expenses and incomes include both rational as well as actual since the accrual system is followed for the preparation of financial statements. Major sources of income are covered under Gross Income and by deducting all repetitive expenses, net income or profit is calculated. There are other heads too forming a part of income statement but can be specific to large scale companies as compared to small scale industries which are fairly simple in reporting as well as functioning.

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