Income statement is amongst the most important and frequently used financial statements in business decision making. Income is also known as “The Profit & Loss Statement”. The basic purpose of making an income statement is to determine how the business has performed its operations. This statement usually is made for a certain period. Strict financial regulations world wide have changed the way this statement are made. Earlier businesses use to make income statements for only a particular period, usually after a year. Nowadays business don’t follow this routine any more. Income statements are made every month, to keep track of how the business is performing. This statement includes mainly two items. One is known as revenue and the other expense. Revenue tells us the earning the business had from its operations. Expenses usually tell about the expenditures made to achieve those revenues. There is also a very important and popular misconception in reading income statements. People usually are not able to understand the difference between revenue and income. Revenue and income are totally different things. Revenue is the income of the company from which no expense is deducted. Income on the other hand represents that portion which is surplus after deducting all the expenses made to achieve the revenue.

The visual outlay of different businesses financial statements may be different but the bottom line remains the same. If the total revenue exceeds the total expenses i.e., Revenue > (greater then) Expenses then the company will have a surplus income. If for example Revenue

William King is the director of USA Wholesale Suppliers and Australian Suppliers Directory. He has 18 years of experience in the marketing and trading industries and has been helping retailers and startups with their product sourcing, promotion, marketing and supply chain requirements.