Austin Carrick: 2016

It also called on the income statement often gains and losses, and, less commonly, the statement of operations, profit, or operating statement, depending on the industry or geographical area in which you operate for our purposes, they are all one and the same thing.

"Come on Tyler, this is a waste of time and everyone knows what is the income statement!" I can hear the argument now. Well, find out what it is, and understanding are two different things, so you have a little patience. Let's start by looking at the Wikipedia definition and statement of income

Is converted, "the financial statement of the company that indicates how (the money received from the sale of products and services before expenses outside, also known as revenue" top line ") in net income is taken (as a result after all revenues and expenses have been accounted for, also known as" the bottom line. ") presents the revenue recognized for a specific period, and the costs and expenses that are deducted these revenues, including write-offs (eg, depreciation and amortization of various assets) and taxes."

Clear as mud? Here is another way to look at it. If you remember from the lesson on the balance sheet and retained earnings, and represent the balance sheet, in one particular moment in time, the company's assets (all they have that is of value) less liabilities (everything that condemns or would cost money in the future) to get its shares (the net value of the company). What does the income statement, along with the owner's equity statement, it tells the story of the change in the balance sheet over a period of time.

Let's boil this to the simplest level, ignoring everyone there from the screaming of exceptions that do not really apply to most of you, entrepreneurs and small business owners. You must have a net income (bottom line of your income statement) is equal to the increase (or minus decrease) in assets during the year minus the increase (or in addition to Decrease) in your liabilities in addition to any cash paid to the owner.

Now think about this, the more assets make you feel happy, right? After all, they represent the elements that have a value to the business, and that it should, in the future, and bring you money. The increase in liabilities make you a little uneasy. Your liabilities are the money that you will have to pay in one day, which will make you unhappy. I hate paying money, but I'm sure like to get it! Maybe that's why my wife calls me a cheap bastard. Now, your dividend is the money that you have already taken. So provided you happiness at some point in the past. So really, net income is to increase your overall happiness in the future, which is less than the increase in misery in the future, in addition to the amount that has already taken in the past happiness!

The statement of income is one of the most important vital sign of the health of your business. If a good income, then more assets can be put to use in the business and more money can be distributed to the owners. The flip side is that when income is negative, which means that you have a loss, then you will have less money to take out of your business, dividends, you will have to support your operations, either by selling assets or increasing liabilities.

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Austin Carrick

Thursday, 7 July 2016

Prepare Income Statement