Income Statements - Reports the level of profit or loss that a business has made in a given period of time (usually one year).
Gross ProfitRevenue - Cost of sales
Operating ProfitGross Profit - Expenses
Profit before taxOperating profit - Finance Costs
Profit for the yearProfit and dividends - tax
Usefulness of income statements:
- Enables the business to make decisions. Being able to see the amount of profit affects future plans on spending
- Management can use them to monitor the progress of the business.
- Figures can be used to workout ratios that help assess business performance
- Can help a business formulate its objectives
- Investors see whether a business is worth investing in
- Governments see the amount of tax that should be paid.