Legal Definitions - statement of income

A statement of income, also commonly known as an income statement or a profit and loss (P&L) statement, is a fundamental financial report that summarizes a company's financial performance over a specific period, typically a quarter or a year. It details all revenues earned and all expenses incurred during that period, ultimately calculating the net profit or loss. Essentially, it shows how much money a business made or lost and why, by subtracting all its costs from all its earnings.

• Example 1: A Local Bakery
  Imagine "Sweet Delights," a small neighborhood bakery. At the end of its fiscal year, the owner prepares a statement of income. This report would list all the money earned from selling bread, cakes, and pastries (its revenue). It would then subtract all the costs associated with running the bakery, such as flour, sugar, butter, employee wages, rent for the shop, and utility bills (its expenses). The final figure on the statement would clearly show whether Sweet Delights made a net profit or incurred a net loss during that year, providing a clear picture of its financial success.

  Explanation: This example illustrates how a small business uses a statement of income to track its sales and operational costs over a period to determine its overall profitability.

• Example 2: A Large Software Corporation
  Consider "GlobalCode Inc.," a publicly traded software development company. Every quarter, GlobalCode Inc. releases its statement of income to its shareholders and the public. This extensive report details billions of dollars in revenue from software licenses, subscription services, and consulting fees. It then deducts significant expenses like research and development, marketing campaigns, employee salaries, data center costs, and administrative overhead. The resulting net income figure is a critical indicator for investors to assess the company's financial health, growth, and efficiency.

  Explanation: This demonstrates how a large, complex corporation uses an income statement to report its financial performance to a broad audience, highlighting the scale of revenues and expenses involved in a global business.

• Example 3: A Community Arts Center
  "The Creative Hub," a non-profit community arts center, also prepares an annual statement of income. While its primary goal isn't to generate profit, it still needs to manage its finances responsibly. Its statement of income would show "revenues" from ticket sales for performances, class registration fees, donations, and government grants. Its "expenses" would include artist fees, facility maintenance, marketing, and administrative staff salaries. The final figure would indicate whether the organization had a surplus (more income than expenses) or a deficit (more expenses than income) for the year, which is crucial for demonstrating financial accountability to donors and grant providers.

  Explanation: This illustrates that even non-profit organizations utilize a statement of income to track their financial performance, showing how they manage incoming funds against their operational costs to ensure sustainability and transparency, even if the "profit" is referred to as a "surplus."