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Income Statement

The Income Statement (also called Profit & Loss or P&L) shows your business's financial performance over a specific period, revealing whether you made a profit or loss.

Income Statement Formula​

Revenue - Expenses = Net Income

Income Statement Structure​

Revenue (Income)​

All money earned from business operations:

  • Sales revenue
  • Service income
  • Other income
  • Interest income

Cost of Goods Sold (COGS)​

Direct costs of producing goods/services sold:

  • Materials
  • Direct labor
  • Manufacturing overhead

Gross Profit​

Revenue - COGS = Gross Profit

Operating Expenses​

Costs of running the business:

  • Salaries and wages
  • Rent
  • Utilities
  • Marketing and advertising
  • Insurance
  • Office supplies
  • Professional fees
  • Depreciation

Operating Income​

Gross Profit - Operating Expenses = Operating Income

Other Income/Expenses​

  • Interest expense
  • Interest income
  • Gains/losses on asset sales

Net Income​

Operating Income +/- Other Items = Net Income

Sample Income Statement​

ABC Company
Income Statement
For the Year Ended December 31, 2024

Revenue:
  Sales Revenue                 $200,000
  Service Revenue                $50,000
  Total Revenue                           $250,000

Cost of Goods Sold:
  Materials                      $60,000
  Direct Labor                   $40,000
  Total COGS                              $100,000

Gross Profit                              $150,000

Operating Expenses:
  Salaries                       $50,000
  Rent                           $24,000
  Utilities                      $12,000
  Marketing                      $10,000
  Insurance                       $8,000
  Depreciation                    $6,000
  Other Expenses                 $10,000
  Total Operating Expenses               $120,000

Operating Income                           $30,000

Other Income and Expenses:
  Interest Expense               ($5,000)

Net Income                                 $25,000

Key Metrics from Income Statement​

Gross Profit Margin​

(Gross Profit / Revenue) × 100 Shows profitability before operating expenses

Operating Margin​

(Operating Income / Revenue) × 100 Shows profitability from core operations

Net Profit Margin​

(Net Income / Revenue) × 100 Shows overall profitability

Next Steps​

Learn about the Cash Flow Statement to understand cash movements in your business.