The Income Statement Inflow and Outflow

The income statement is another important type of business financial statement. As does the balance sheet, the income statement also has different names in that it is sometimes referred to as the profit and loss statement, statement of earnings, statement 

The income statement presents the type and amount of income (I) and expense (E), along with the difference over a specified period of time, and shows the net income (NI). Any time period is possible, but typically income statements are prepared on a monthly, quarterly, or annual basis. The basic equation for the income statement is  

As is the case with the balance sheet, two example income statements are presented—the first applies to personal income and expenses and the second applies to a business. Later in this chapter, a second business income statement is used to explain the importance of the income statement for a professional services business. 

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