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For example the same 10 million piece of equipment with a 5-year life has a depreciation expense of 2 million each year.
Explain the purpose of an income and expenditure statement. It is prepared with the objective of finding out the surplus or deficit arising out of current incomes over current expenses. It is always important to have a clear picture of financial plans both income and expenditure. The purpose of an income statement is to show a companys financial performance over a period.
This information is more valuable when income statements from several consecutive periods are grouped together so that trends in the different revenue and expense line items can be viewed. Income statement is one of the important financial reports of company which is prepared with the purpose of providing the summary of all the revenues and the expenses over the time period in order to ascertain the profit or loss of the company and measuring its business activity over the time period depending upon various requirements of users of income statement. The income statement is prepared following the accruals concept.
The income statement is one of three statements. Conclusion Purpose of Income Statement An income statement is an important indicator of a companys financial health. The format of the income statement components allows for dissecting the revenues expenses operating income and profits of an entity.
It basically helps the reader to determine whether during the course of the year the company has overall made a profit or incurred losses. The income statement is a results-oriented report showing the net income or loss over a specified period. It is also referred to as a profit and loss statement or earnings statement.
An income and expenditure statement is a type of financial document designed to identify all forms of income that is received within a given period while also documenting all payments or expenditures that were related to that same period. This means that income and expenses are recorded in the income statement as they are earnedincurred regardless of whether cash has been receivedpaid. It is ready with the target of sorting out the excess or deficit arising out of current incomes over current expenses.
It tells the financial story of a businesss activities. The Income Statement is one of a companys core financial statements that shows their profit and loss over a period of time. Accountants create income statements using trial balances from any two points in time.
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