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What is income statement

income statement

The income statement is one of the four important statements used to report the financial performance of a company during a specific accounting period, with two other main statements being: the balance sheet and the statement of cash flows, also known as the statement of profit and loss or statement of income and expenses, where the income statement mainly focuses on The company's revenues and expenditures during a specific period, which is a maximum of a fiscal year, a fiscal quarter, or a half-year.
What is income statement
 What is income statement

profit concept

A company uses its assets to produce goods and services, and its success depends on whether it is wise or lucky in the assets it chooses to keep, and the ways in which these assets are used to produce goods and services. All sources other than contributions or withdrawals of money by owners and creditors, net income is the accountant's term for the amount of profit being reported for a certain period of time.

The purpose of the income statement

It is important to note that there are several different types of income statements that are generated for different reasons, for example, the year-end statement that is prepared annually to shareholders and potential investors does not do much to the management as they try to run the company throughout the year thus, financial statements are prepared temporary management to check the status of operations during the year, the management also prepares the departments’ statements that analyze the revenue and expense figures by business sector at the end, the main objective of all profit and loss statements is to convey the profitability and business activities of the company with the end-users, each one of these end-users He has his own use of this information.

Income statement users

There are two different groups of people who use this financial statement: internal users and external users internal users, such as company management and the board of directors, use this statement to analyze the business as a whole and make decisions about how to run it, for example, performance numbers are used to measure whether Opening a new branch, closing a department or increasing the production of a product, on the other hand, external users - such as: investors and creditors - are people outside the company who do not have a source of financial information about the company except for published reports, and investors want to know how profitable the company is and whether it will grow and become On the other hand, creditors are not as concerned about profitability as investors, creditors are more concerned with the company’s cash flow and if they generate enough income to pay off their loans, Competitors are also external users of financial statements, and they use competitors' P&L to gauge how other companies are doing in their field and whether they should enter C markets New and trying to compete with other companies.
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