The income statement is an easy-to-read listing of the money we received from all sources, Cost of Goods Sold, and expenses combined into categories such as office supplies, telephone, or utilities. For the most part it is straight forward. Presenting the reader what kind of income an organization received and on anything the money was spend. Income statements cover a period such as last month or fiscal year. In many cases a budget is compared to the actual spending measuring the current financial events predicted at the time the budget was established.
The income statement starts out by showing all sources of income. Starting with income related to the purpose of the organization and followed by unrelated business income. In a non-profit the first category would be donations of any kind. Followed by rental, grants, and investment income.
Next are the CoGS (Cost of Goods Sold), here are expenses accounted for related to creating your product. Materials, supplies, etc. Also part of CoGS are wages to the employees creating the product. Your office administrator, for example, is an expense and not CoGS.
Lastly, the listing of expenses. They are usually grouped by categories such as payroll, administration, or maintenance.
At the bottom of the income statement the reader sees the tally of all income less expenses. This figure is carried over to the balance sheet into Retained Earnings. A positive figure will increase retained earning a negative decrease it.
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