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Introduction to The Income Statement

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A company's income statement summarizes how its operations performed during a given period. It tells you how much money it brought in, how much it spent, and the difference between the two. The details on these numbers and how they break down are covered in this tutorial.

What you will learn

  • Revenue on the Income Statement
  • Expenses on the Income Statement
  • Important Income Statement Calculations
  • Accrual Accounting

What do you know?

Introduction to The Income Statement

Though learning basic accounting may not be the most enjoyable exercise, knowing how to interpret a company’s financial statements is critical to understanding how a business is performing as well as figuring out if a stock is a good value.

In this lesson we cover the income statement, which summarizes how the company’s operations performed during a given period. It tells you how much money a company has brought in (its revenues), how much it has spent (its expenses), and the difference between the two (its profit). Did the company make a profit during the period? Did it improve its business over last year? The income statement will provide you with this information, and more.

Next, we will walk through the different components of the income statement and illustrate how they may vary across different companies. By the end of the lesson, you should have a grasp of how to read an income statement, and you’ll be able to test your knowledge by answering questions using a fictional company’s income statement.