Income Statement: Overview
An Income Statement, also known as a Profit & Loss Statement, is a financial document used to record the revenue and expenses of a company over a period of time. It is a summary of the company’s performance and financial position for a specific period of time, and is used to assess the company’s current financial position and performance.
Inventor of the Income Statement: Luca Pacioli
The inventor of the Income Statement is generally credited to Luca Pacioli, an Italian mathematician and Franciscan friar who lived in the 15th century. He is widely considered to be the father of accounting, and he wrote a book on the double-entry bookkeeping system in 1494. The book was titled Summa de Arithmetica, Geometria, Proportioni et Proportionalita and included a section on the use of the Income Statement to measure a company’s performance and financial position.
Purpose of the Income Statement
The purpose of the Income Statement is to provide a summary of the company’s revenue and expenses over a period of time. This allows investors and other stakeholders to assess the company’s financial health and performance. It also helps to identify areas where the company can improve its operations and increase profitability.
Components of the Income Statement
The Income Statement typically includes the following components:
1. Revenue: This is the total amount of money earned by the company over a period of time.
2. Expenses: This is the total amount of money spent by the company over a period of time.
3. Net Income: This is the total amount of money left over after all revenue and expenses have been taken into account.
• What is an Income Statement?
• How is an Income Statement used?
• Who invented the Income Statement?
• What are the components of an Income Statement?
• How is a Net Income calculated?
• What is the difference between an Income Statement and a Balance Sheet?
• What is the purpose of an Income Statement?
• How often should an Income Statement be prepared?
• What other financial documents are used to assess a company’s performance?
• What is double-entry bookkeeping?