Income Statement

Income statement (also referred to as (a) statement of income and expense or (b) statement of profit or loss or (c) profit and loss account) is a financial statement that summaries the results of a company’s operations for a period. It presents a picture of a company’s revenues, expenses, gains, losses, net income and earnings per share (EPS).

Together with balance sheet, statement of cash flows and statement of changes in shareholders equity, income statement forms a complete set of financial statements.


A typical income statement is in report form. The header identifies the company, the statement and the period to which the statement relates, the reporting currency and the level of rounding-off. The header is followed by revenue and cost of goods sold and calculation of gross profit. Further down the statement there is detail of operating expenses, non-operating expenses, and taxes and eventually the statement presents net income differentiating between income earned from continuing operations and total net income. In case of a consolidated income statement, a distribution of net income between the equity-holders of the parent and non-controlling interest holders is also presented. The statement normally ends with a presentation of earnings per share, both basic and diluted. Important line items such as revenue, cost of sales, etc. are cross-referred to the relevant detailed schedules and notes.


There are two types of income statements: single-step income statement, in which there are no sub-totals such as gross profit, operating income, earnings before taxes, etc.; and multi-step income statement, in which similar expenses are grouped together and intermediate figures such as gross profit, operating income, EBIT, etc. are calculated.

Another classification of income statement depends on whether the expenses are grouped by their nature or function. Income statement by nature classifies expenses according to their nature i.e. without allocating them to different business activities, while income statement by function classifies expenses according to the business operations that they support. For example, income statement by nature shows line items such as salaries, depreciation, rent, etc., while income statement by function allocate salaries, depreciation, rent, etc. between cost of good sold, selling expense, general and admin expenses, etc.

Example: Template

Below is a sample income statement. The first five lines make the header followed by a multi-step overview of expenses. All amounts other than EPS are in million USD.

IS Global, Inc.
(Consolidated) Statement of Income and Expense
for the year ended 31 December
Cost of sales15(158.4)(151.6)
Gross profit43.530.5
Selling and distribution expenses16(9.8)(8.9)
General and administrative expenses17(14.0)(11.0)
Other operating income and gains181.82.6
Other operating expenses and losses19(3.4)(1.3)
Operating profit/earnings before interest and taxes (EBIT)18.111.9
Interest income201.30.6
Interest expense20(3.6)(2.8)
Net interest expense20(4.9)(3.4)
Profit from investments under equity method226.95.5
Earnings before taxes20.114.0
Income taxes23(6.0)(4.2)
Income from continuing operations14.19.8
Income from discontinued operations242.13.1
Net income1716.212.9
Distribution of net income:
Equity-holders of parents14.611.6
Non-controlling interest-holders1.61.3
Earnings per share:19
Basic, attributable parent0.150.12
Diluted, attributable to parent0.150.11
Basic, from continued operations, attributable to parent0.140.10
Diluted, from continued operations, attributable to parent0.140.09


Following are key line items that appear on a typical income statement:

Written by Obaidullah Jan, ACA, CFA