INCOME

STATEMENT
PRESENTED BY

HARI PRIYA 102114025

JENKINS-102114026

ARVIND-102114027
Financial Statement

Financial Statement is a group of reports that tell a

companys financial status
From company owners to potential investors everyone
in between are interested
People are interested because they want to know how
much money they made or how much money they
spent
Some want to know how much money was reinvested
in the company
There are three financial reports that are created during
the accounting cycle
INCOME STATEMENT

Income Statement is the member of Financial

Statement that tell us whether or not a company made
a profit or incurred a loss.
It is something refers to Profit & Loss statement,
Statement of Income
Important because it shows the profitability of a
company during the time interval
It varies from company to company:
Three months
Four weeks
Fiscal years (1st April 31st March)
TERMS OF INCOME
STATEMENT
The operating section of an income statement includes revenue and expenses
The non-operating section includes revenues and gains from non-primary
business activities, items that are either unusual or infrequent, finance costs like
interest expense and income tax expense
REVENUES: Revenues are cash inflows based on production and delivery of
goods and other activities constituting the company's major operations. One can
simply put it as the money received from the sale of products and services before
the expenses are taken out, also known as the top line. Examples of revenues are
sales revenue, interest revenue and rent revenue.
NET INCOME:Net income also called the bottom-line is the excess of all
revenues / gains over all expenses / losses of the period. These are post the
deductions of finance costs, depreciation and taxes. On the other hand, Net loss
is the excess of expenses and losses over revenues and gains for a period .
There are 2 things to be taken into account
1. Revenue (Money that company takes
in)
2. Expenses (Money that company pays
out)
Revenue Expenses = Net Income
 OPERATING REVENUES AND EXPENSES: This
section includes the revenue and expenses. Revenues
are the cash inflows or other enhancement of the assets
while the expenses are the cash outflows or using up
the assets or incurrence of liabilities .
Earnings Per Share (EPS): Earnings per share data
provides a measure of the company's management and
past performance and enables users of financial
statements to evaluate future prospects and assess
dividend distributions to shareholders.
Why Income statement

The Income Statement is one of the major financial

statement used by accountants and business owners

It shows the Profitability of a company during the time

interval specified in its heading

It helps in Identifying Risk And Opportunities and forecast

future performance for :-
Owners
Creditors
Competitors
Investors
What does an income
statement contain
Contents of Income
Statement
1) Revenue From Operation :

PARTICULARS
Note :
In respect of company other than a financial finance company revenue from
operation shall disclose separately in the notes revenue from
Sale of products
Sale of services
Other operating revenues
Less:
Excise duty
while , in respect of a finance company revenue from operation
shall include from
Interest and
Other financial services
Revenue under each of above heads shall be disclosed separately
by way of notes to accounts to extent applicable
2) Other Income
3) Cost Of Material Consumed , Purchase Of Stock In Trade :

4) Changes In The Inventories of Finished Goods ,

Stock In Trade ,Work-in-progress :

5) Employee Benefits Expenses:

6) Finance Cost:

7) Depreciation And Amortization Expense:

Amortization and depreciation are non-cash expenses on a

company's income statement. Depreciation represents the cost
of capital assets on the balance sheet being used over time,
and amortization is the similar cost of using intangible assets
like goodwill over time.
Other Expenses:
 Exceptional items:
When items of income and expenses from ordinary activities
are of such size , nature or incidence that their disclosure are
relevant to explain the performance of the enterprise for the
period ,the nature and amount of such items should be
disclosed separately . Eg , the disposal of items of fixed asset,
provision for the costs of reconstruction.

Extra ordinary items:

These are those incomes or expenses that arises from event or
transaction that are clearly distinct from ordinary activities of
the enterprise and therefore are not expected to recur
frequently or regularly E.g. loss from earthquake.
Advantages

Provides detailed information on revenues:The income

statement provides detailed data on revenues. Besides the
normal costs such as the cost of goods sold (COGS), employee
expenses, operational expenses, it also accounts for additional
costs like taxes applicable. It accounts for revenues earned from
sales and revenues gained from non operational components
like interest accrued by different investments. Hence, the
income statement is an ideal source for complete revenue
information.
Database for Investor Analysis: It is an important document
for investors who need detailed information before investing
into any company. It provides all the data from sales to profits,
operational efficiency to other non operational aspects. All this
cumulatively helps investors get a clear picture of how the
business is and expected to be. Thus, it is a single source to
judge the condition of a company.
 Other benefits: The income statement shows the
profitability of the company over a period of time. The
company can determine the major revenues it has
earned. Secondly, it is significant because it is based on
the matching principal and shows the expense incurred
by a company to earn the revenues. From an
investment perspective, shareholders of a company are
interested in the net income because the dividends are
paid out of the total income. Moreover, income
statement also helps the companies analyze their
expenses and take into account the major streams of
operating revenues of the company.
Disadvantages

Misrepresentation of data:The income statement includes not

only current revenues gained from sales but also the money due
from accounts receivable which the business has not paid yet,
just as it includes liabilities as expenses that have not actually
been paid yet. Also, the large one-time expenses or revenues
can drive the income sharply up or down from what it actually
should be. This leads to misrepresentation of the success of the
company
Other factors:The income statement helps in gauging the
earnings per share and other past financial data, but it does not
provide with data on the expected future growth. It does not
give any indication on how the revenue generation happens. A
business may be underpaying employees and overcharging
customers to create its profits, practices that will eventually
cause business problems but show as positives on the financial
document.
 Any investor looking into the income statement
has to have these additional factors also in mind
before taking any financial decision. One needs to
remember that the income statement is considered
as a fiction because it is based on accrual
accounting and it does not provide cash
transactions. Free cash cannot be calculated
through income statement
Gem Chemicals
Thank you!