income statement template for business plan

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Income Statement Templates

Get in-depth insight of your business performance with income statement. download these easy to use example income statement templates..

What is Income Statement?

An income statement gives an overview of a company’s income and expenses. It is a type of financial statement used to evaluate the company’s performance in the short term. Since most other financial statements are prepared annually or biannually, an income statement is also created monthly or quarterly. An income statement is also called a profit and loss statement, earnings statement, or statement of operations. 

An income statement helps managers and investors make decisions in the short term. It helps assess the company’s growth trajectory.

The income statement is primarily used for measuring profitability, not cash flow. 

Why use an income Statement

An Income Statement is prepared monthly and quarterly. Unlike other financial statements and reports, the income statement gives business profitability information on a monthly basis. A monthly report can help identify immediate threats and opportunities and a business can avoid nose dive. 

You can also use this income statement template in financial planning of your business plan . Having a template for income statement will save you time and hassle in writing your business plan . 

Investors may also ask for income statements in addition to the balance sheet and other financial reports. The reason is the same as the income statement focuses more on the short term. 

Income Statement Template for Business Plan

A forecast income statement is an essential part of a business plan. Along with cash flow statement and balance sheet, income statement makes the financial planning part of the business plan. 

This income statement template for business plan can be used without any additional changes; download income statement template, populate it with forecast numbers and your income statement for business plan is ready. 

Download Free Income Income Statement Templates

There are two basic types of income statements, Single-step income statements, and multi-step income statements. Here is a short side-by-side comparison of the two. When you are unsure about it, use Single Step Income Statement. 

We have prepared these three income statement templates. You can also download income statement excel format. You can also use the income statement template for business plan.

Basic Single Step Income Statement

Traditional Income Statement

Multi-step income statement

Download single or simple income statement template in excel format here. Put in your business numbers in the templates and see how your business is doing!

Download Single Step Income Statement Template Excel

Traditional income statement is easy to use. Download the traditional income statement template and make financial statement for your business. 

Download Traditional Income Statement Template

Multi Step Income Statement gives an in-depth analysis of your business. Download this free multi step income statement template to look closely into your business performance. 

Download Multi Step Income Statement Template

Comparison of Single Step Income Statement vs Multi Step Income Statement

A single step income statement is prepared with simple accounting equation that subtracts ‘losses and expenses’ from ‘revenues and gains’. Whereas the multi step income statements also include the the expenses and revenues from non-operational resources and follows a three step approach to calculate net income. An example of income statement will include all the list items mentioned here. 

Income Statement Formula

In one line, the income statement formula is:

“ total revenues – total expanses= Net income”

An income statement gives a comparison and overview of the company’s revenue and expenses. It helps understand the business growth trajectory in the short term. 

If your business’s revenues are greater than the expenses, your company is making a profit. Whereas, if your expenses are more than your revenues, your company needs to look closely into the income statement and take the necessary steps for making it profitable again. 

The income statement displays the net profitability of a business. It serves as a tool for investors and owners and it shows the company’s profitability. 

An income statement is a better financial report for checking the performance of a business in the short run. 

What goes on an income statement?

For most businesses, the income statement items will be different. However, the structure stays the same. Most templates can be used for any industry after a few changes. You will find these list items on any income statement example.

• Cost of Goods Manufactured
• Gross Margin
• Amortization
• Depreciation
• Rent expense
• Salaries and Wages
• Phone and internet
• Operating Income (EBIT)
• Interest Expense
• Earnings Before Tax (EBT)

How to Prepare an Income Statement?

We have provided simple income statement templates and you can use them as guidelines for preparing an income statement. Our templates are compatible with Microsoft Excel; you can download and use them for your business. 

The following steps will be helpful for you in preparing an income statement. 

1. Select a Reporting Period 

An income report shows revenues and expenses for a certain time period. You can choose any time period from one month to many years. 

Mostly income statement is created on a monthly, quarterly, bi-annually, or yearly basis. Most companies create monthly income statements to keep a close eye on their performance. 

2. Prepare a Trial Balance Report 

You will need to create a standard trial balance report for creating an income report. A trial balance report gives end balance numbers for each account which is necessary for the income statement. If you are using an accounting tool, you can easily prepare and print out the trial balance report in a few clicks. 

3. Calculate Revenue 

Next, you will need to calculate all the revenues your firm has earned in the selected time period. Revenues will include everything you have earned from selling your goods or services in the reporting period, whether you have received the payment or not. 

4. Calculate Cost of Goods Sold 

Cost of goods sold includes the labor cost, materials cost, and overhead costs you have made in offering your goods or services. 

From your trial balance, add the ‘cost of goods sold items and put the number on the income statement below revenue line items. 

5. Calculate Gross Margin  

Subtract ‘cost of goods sold’ from ‘Revenues’ and you will have your Gross Margin number. 

6. Include Operating Expenses 

Take all the operating expenses line items from your trial balance and put the final number in ‘selling and administrative expanses’ in the income statement. 

7. Calculate your Income 

When you take out the ‘selling and administrative’ expanses from ‘Gross Income’, you will get your income before taxes. 

8. Include Income Tax

Find your state’s tax rate, multiply it with your pretax income and you will get the income amount you will have to pay. The income tax number will go below the pretax income in the income statement.

Pro Tips: learn how to to calculate income tax with our income tax calculator .

9. Calculate Net Income  

Take out the income tax from pretax income and you will get your net income. Your net income will give you an overview of your business performance and profitability. 

10. Finalize the Income Statement

Add the ‘Income Statement’ in the header of the income statement report for easier identification. Your income statement is complete now. 

In case you are using income statement template in a business plan, you will put the expected, forecast numbers in the template to prepare the income statement. 

Need help creating other essential business reports?

Download our 15+ designer approved business templates for free and make your clients feel impressed.

Frequently Asked Questions

A Profit and loss statement (P&L statement) is also called an income statement. An income statement or P&L statement is the summary of revenues, expenses, cost of goods sold, administrative expenses, and taxes for a specific time period. 

Income statement and balance sheet are not the same. Both of these reports give important information about the business; an income statement gives a profit and loss assessment of a business while balance sheets tell about the financial situation of a business at a certain point in time. 

Income statement can be prepared for both cash and accrual-based accounting. However, the revenues and expenses calculation method will be different as we will only be recording the revenues received and expenses made.

Income Statement shows the current profitability of a business. It details the revenues and expenses of a business. The income statement can be negative if the expenses and costs are more than the total revenue. 

An income statement includes the following expenses.

Cost of goods sold- the expenses you incur for the materials and labor. 

Selling, General and Administrative Expanses-this head include all indirect expenses, advertising expenses, overhead expenses, rentals, etc. 

Depreciation and Amortization- Depreciation shows the decrease in the value of tangible assets like machinery, automobiles, etc; amortization is the decrease in the value of intangible assets like patents and trademarks. 

Research and Development-If your business has a research and development facility, you will need to add these costs to the income statement. 

There are two basic types of income statements; single-step income statements and multistep income statements. A multistep income statement has more details and includes incomes and expenses. 

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• Write Your Business Plan | Part 1 Overview Video
• The Basics of Writing a Business Plan
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• How to Use Your Business Plan to Track Performance
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• Is This Idea Going to Work? How to Assess the Potential of Your Business.
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• Write Your Business Plan | Part 3 Overview Video
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• Write Your Business Plan | Part 5 Overview Video
• What Equipment and Facilities to Include in Your Business Plan
• How to Write an Income Statement for Your Business Plan
• How to Make a Balance Sheet
• How to Make a Cash Flow Statement
• How to Use Financial Ratios to Understand the Health of Your Business
• How to Write an Operations Plan for Retail and Sales Businesses
• How to Make Realistic Financial Forecasts
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• What Technology Needs to Include In Your Business Plan
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• The Role of Franchising
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How to Write an Income Statement for Your Business Plan Your income statement shows investors if you are making money. Here's everything you'll need to create one.

By Eric Butow Edited by Dan Bova Oct 27, 2023

Key Takeaways

• An income statement is your business's bottom line: your total revenue from sales minus all of your costs.

Opinions expressed by Entrepreneur contributors are their own.

This is part 3 / 12 of Write Your Business Plan: Section 5: Organizing Operations and Finances series.

Financial data is always at the back of the business plan, but that doesn't mean it's any less important than up-front material such as the description of the business concept and the management team. Astute investors look carefully at the charts, tables, formulas, and spreadsheets in the financial section because they know that this information is like the pulse, respiration rate, and blood pressure in a human being. It shows the condition of the patient. In fact, you'll find many potential investors taking a quick peek at the numbers before reading the plan.

Related: How to Make Realistic Financial Forecasts

Financial statements come in threes: income statement, balance sheet, and cash flow statement. Taken together they provide an accurate picture of a company's current value, plus its ability to pay its bills today and earn a profit going forward. This information is very important to business plan readers.

Why You Need an Income Statement

In his article, How to Do a Monthly Income Statement Analysis That Fuels Growth , Noah Parsons writes: "In short, you use your income statement to fuel a greater analysis of the financial standing of your business. It helps you identify any top-level issues or opportunities that you can then dive into with forecast scenarios and by looking at elements of your other financial documentation.

Related: How to Make a Balance Sheet

You want to leverage your income statement to understand if you're performing better, worse or as expected. This is done by comparing it to your sales and expense forecasts through a review process known as plan vs actuals comparison. You then update projections to match actual performance to better showcase how your business will net out moving forward."

What Is In an Income Statement

An income statement shows whether you are making any money. It adds up all your revenue from sales and other sources, subtracts all your costs, and comes up with the net income figure, also known as the bottom line.

Related: How to Make a Cash Flow Statement

Income statements are called various names—profit and loss statement (P&L) and earnings statement are two common alternatives. They can get pretty complicated in their attempt to capture sources of income, such as interest, and expenses, such as depreciation. But the basic idea is pretty simple: If you subtract costs from income, what you have left is profit.

To figure out your income statement, you need to gather a bunch of numbers, most of which are easily obtainable. They include your gross revenue, which is made up of sales and any income from interest or sales of assets; your sales, general, and administrative (SG&A) expenses; what you paid out in interest and dividends, if anything; and your corporate tax rate. If you have those, you're ready to go.

Related: Tips and Strategies for Using the Balance Sheet as Your Franchise Scorecard

Sales and Revenue

Revenue is all the income you receive from selling your products or services as well as from other sources such as interest income and sales of assets.

Gross Sales

Your sales figure is the income you receive from selling your product or service. Gross sales equals total sales minus returns. It doesn't include interest or income from sales of assets.

Interest and Dividends

Most businesses have a little reserve fund they keep in an interest-bearing bank or money market account. Income from this fund, as well as from any other interest-paying or dividend-paying securities they own, shows up on the income statement just below the sales figure.

Related: How to Measure Franchise Success With Your Income Statement

Other Income

If you finally decide that the branch office out on County Line Road isn't ever going to turn a decent profit, and you sell the land, building, and fixtures, the income from that sale will show up on your income statement as "other income." Other income may include sales of unused or obsolete equipment or any income-generating activity that's not part of your main line of business.

Costs come in all varieties—that's no secret. You'll record variable costs, such as the cost of goods sold, as well as fixed costs—rent, insurance, maintenance, and so forth. You'll also record costs that are a little trickier, the prime example being depreciation.

Related: How to Use Financial Ratios to Understand the Health of Your Business

Cost of Goods Sold

Cost of goods sold, or COGS, includes expenses associated directly with generating the product or service you're selling. If you buy smartphone components and assemble them, your COGS will include the price of the chips, screen, and other parts, as well as the wages of those doing the assembly. You'll also include supervisor salaries and utilities for your factory. If you're a solo professional service provider, on the other hand, your COGS may amount to little more than whatever salary you pay yourself and whatever technology you may use for your business.

Related: My Company Hears Hundreds of Pitches Every Year — Here's What Investors Are Actually Looking For.

Sales, General, and Administrative Costs

You have some expenses that aren't closely tied to sales volume, including salaries for office personnel, salespeople compensation, rent, insurance, and the like. These are split out from the sales-sensitive COGS figure and included on a separate line.

Depreciation

Depreciation is one of the most baffling pieces of accounting wizardwork. It's a paper loss, a way of subtracting over time the cost of a piece of equipment or a building that lasts many years even though it may get paid for immediately.

Related: 10 Mistakes to Avoid When Pitching Investors (Infographic)

Depreciation isn't an expense that involves cash coming out of your pocket. Yet it's a real expense in an accounting sense, and most income statements will have an entry for depreciation coming off the top of pretax earnings. It refers to an ongoing decrease in asset value.

If you have capital items that you are depreciating, such as an office in your home or a large piece of machinery, your accountant will be able to set up a schedule for depreciation. Each year, you'll take a portion of the purchase price of that item off your earnings statement. Although it hurts profits, depreciation can reduce future taxes.

Paying the interest on loans is another expense that gets a line all to itself and comes out of earnings just before taxes are subtracted. This line doesn't include payments against the principal. Because these payments result in a reduction of liabilities—which we'll talk about in a few pages in connection with your balance sheet—they're not regarded as expenses on the income statement.

Related: How to Craft a Business Plan That Will Turn Investors' Heads

The best thing about taxes is that they're figured last, on the profits that are left after every other thing has been taken out. Tax rates vary widely according to where your company is located, how and whether state and local taxes are figured, and your special tax situation. Use previous years as a guidepost for future returns. If you are just opening your business, work carefully with your accountant to set up a system whereby you can pay the necessary taxes at regular intervals.

Buzzword: EBIT

EBIT stands for earnings before interest and taxes. It is an indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest.

Related: Don't Make This Huge Mistake on Your Financial Model

Important Plan Note

Don't confuse sales with receipts. Your sales figure represents sales booked during the period, not necessarily money received. If your customers buy now and pay later, there may be a significant difference between sales and cash receipts.

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

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Financial Projections for Your Business Plan

Take Your Business Plan to the Next Level

Financial projections are a crucial part of any business plan. Plannit AI’s financial projections and income statement generator simplifies the process, allowing entrepreneurs to create accurate, detailed financial forecasts with ease. This feature streamlines the process of generating your initial financial information.

Comprehensive Financial Overview

Our algorithms merge seamlessly with the GPT-4 engine to learn from your revenue model, business information and financial inputs, to automatically generate a comprehensive financial overview for your business plan. This includes an in-depth look at the projected growth rate of the company, the expected revenue, and the anticipated expenses.

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Simplified User Experience

Answer a few additional questions to allow us to calculate your financial projections and generate an income statement for your business plan. All in under 30 seconds.

Detailed 3-Year Income Statement

Based on your revenue model, your business information and your financial inputs, we generate a detailed 3-year income statement for your business plan, formatting your vision into dollars.

Create Your Business Plan Today

Simple Income Statement Template (In Excel)

When creating your business plan, you’ll need to include a comprehensive income statement. An income statement, also commonly referred to as a profit and loss statement, is essentially a snapshot of your business’s profitability or the profits generated from operations over a certain period of time. It contains the company’s revenues, total operating expenses, and net income over a specific time period. 

This information is important to potential lenders or investors, as it will show them how the company is performing. It can also help identify areas of improvement and track income and expenses over time. So if you’re in the midst of creating your business plan, you need to include an income statement to show investors and other shareholders the state of your finances.  

What is a Pro Forma Income Statement?

A pro forma income statement is an advance income statement projection that is used to estimate a company’s financial performance in the future. It is prepared before the actual income statement is finalized and takes into account changes in market conditions, as well as any planned investments or expenses. The pro forma statement contains estimated figures that are not yet finalized, allowing businesses to plan ahead and make more informed decisions when it comes to their finances.

The pro forma statement typically includes projected sales revenues and expenses, such as costs of goods sold, operating expenses, and interest expenses. The goal of a pro forma income statement is to provide companies with an idea of how their business will perform financially in the future so they can adjust their budget according to the estimated outcomes. A pro forma can also be used to compare different scenarios and forecast potential challenges or opportunities for a business moving forward.

In addition, a pro forma statement can be used by investors as a tool for analyzing a company’s performance over time, as well as its ability to meet short-term goals or take on new projects. This allows investors to gain insights that are not easily visible when solely focusing on historical data points or industry averages. By taking into account current trends and accurate assumptions about the future, a pro forma provides valuable information that can help investors make better investment decisions.

Why You Need an Income Statement For Your Business

There are several reasons why your business needs an income statement:

• Helps you get funding: First and foremost, an income statement is essential for obtaining financing from potential investors. Without an income statement in your business plan, it is almost impossible to receive funding for your business, as investors will want to know exactly how much money your business has earned or lost in order to make an investment decision. By having a clear and up-to-date profit and loss statement in your business plan, you can provide potential investors with the vital information they will need in order to make an informed decision.
• Helps monitor financial performance: An income statement provides owners and investors with important insights into a business’s financial performance over a given period of time. This allows the owner to track revenue and expenses, as well as any gross profit or loss that may have been incurred throughout the year. These insights can then be used to make better business decisions in the future, such as hiring additional staff or investing in new equipment.
• Improves decision-making: By having an income statement in place, a business is able to make more informed decisions on how to best allocate its resources. This can be especially helpful when attempting to determine the impact that certain expenses may have on a company’s bottom line. With the help of an income statement, businesses can better understand which investments or expenditures are necessary for the long-term health of the organization.
• Completes your business plan: You need a business plan for several reasons, including raising capital, obtaining a loan, or even just formalizing your business concept. An income statement is an essential component of any business plan, as it provides investors, lenders, and other shareholders with the necessary information to make an informed decision about your business.

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Components of a Simple Small Business Income Statement

When working on your income statement, there are several essential components that you need to include to get an accurate picture of your financials. These components include: 

Revenue is the amount of money your business earns from its sales. This includes all income generated through the sale of products and services, as well as any other fees your company may collect.

Expenses are all costs associated with running a business. These business expenses include things like labor costs, materials, rent or utilities, marketing expenses, insurance costs, taxes and any other operating expenses specific to your type of business.

Cost of Goods Sold (COGS)

Cost of goods sold (COGS) refers to the amount of money spent on producing the goods or services that your company sells. This includes all direct expenses associated with the production and delivery of products and services, such as the cost of raw materials, labor costs, and shipping and handling fees.

Non-Operating Income And Expenses

Non-operating income and expenses refer to sources of income or costs that are not directly related to the core operations of your business. This could include things like interest income, dividends, or gains from investments. It could also include any non-operational expenses such as legal fees or accounting services.

Gains And Losses

Gains and losses refer to amounts earned or spent outside of the core operations of your business. This could include any gains or losses due to currency exchange rates, investments, or other activities not related to the day-to-day running of your business.

The net income is calculated by subtracting total expenses from total revenues. This number will tell you whether or not your business has earned a net profit or incurred a loss in the given period of time. It’s important to note that in some cases, there may be additional expenses, such as depreciation charges, that should be taken into account when calculating net income.

Get our free income statement template download to help you create your own.

Download our Sample Income Statement

How To Create a Basic Income Statement For Small Businesses

Now that you know what you need to include in your income statement, you’re ready to create one. Creating an income statement for your small business is quite simple. All you need is a simple spreadsheet, like Microsoft Excel, to get started. Below are the steps you should take to create your income statement:

• Choose Your Period:  First, you have to decide on the time frame for your income statement. This could be monthly, quarterly, or annually.
• Gather Your Data: The next step is to collect all of your data for the given period. This includes sales and revenue figures, as well as costs associated with running your business, such as expenses, COGS, and non-operating income and expenses.
• Arrange Your Spreadsheet: Before inputting your data, you need to organize your income statement so that it’s easy to read and understand. That means creating separate categories, such as revenue, expenses, gains and losses, etc. and putting them in separate columns or rows. 
• Input Formulas:  Once you have your spreadsheet organized, you need to input formulas to calculate total revenue, total expenses, net income, and other components of your statement.  It’s easiest to do this before inputting all your data.
• Input Your Data: Once you have everything organized into categories, it’s time to enter your data into the spreadsheet. It’s best to start with one category at a time. For example, first, input all your revenue data, then move on to expenses, etc.
• Calculate Your Net Income: Once all of your data is entered in, you can calculate your net income by subtracting total expenses from total revenue. This will give you an accurate picture of how your business has performed over the given period of time.
• Save & Review:  Once you’ve calculated your net income, save the spreadsheet and review it to ensure that all of your numbers are accurate. You’ll want to save this as your own income statement template so you can use it again in the future. It is recommended that you update your income statement at least once a year.

Other Financial Statements

The income statement is not the only financial statement that is important for your small business. Other financial statements, such as a balance sheet and cash flow statement, are also essential to understanding the company’s financial health.

The balance sheet is a snapshot of the financial position of your business at a given point in time, showing assets, liabilities, and capital. It’s a useful tool for understanding the overall financial situation of your business. It’s very similar to the income statement, but the difference is that the balance sheet shows a static point in time, whereas the income statement shows the financials over a period of time.

The cash flow statement is another important financial document that tracks the flow of money into and out of your business. It shows how much cash has been generated, as well as how much is being spent. This document can be used to understand the financial health of your business and make sound decisions about investing and other financial activities. However, unlike the income statement or balance sheet, it does not track any non-cash transactions such as depreciation, investment gains, or other activities not related to the day-to-day running of your business.

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Original text

Access our collection of user-friendly templates for business planning, finance, sales, marketing, and management, designed to assist you in developing strategies for either launching a new business venture or expanding an existing one.

You can use the templates below as a starting point to create your startup business plan or map out how you will expand your existing business. Then meet with a  SCORE mentor to get expert business planning advice and feedback on your business plan.

If writing a full business plan seems overwhelming, start with a one-page Business Model Canvas. Developed by Founder and CEO of Strategyzer, Alexander Osterwalder, it can be used to easily document your business concept.

Download this template to fill out the nine squares focusing on the different building blocks of any business:

• Value Proposition
• Customer Segments
• Customer Relationships
• Key Activities
• Key Resources
• Key Partners
• Cost Structure
• Revenue Streams

For help completing the Business Model Canvas Template, contact a SCORE business mentor for guidance by phone

From creating a startup budget to managing cash flow for a growing business, keeping tabs on your business’s finances is essential to success. The templates below will help you monitor and manage your business’s financial situation, create financial projections and seek financing to start or grow your business.

This interactive calculator allows you to provide inputs and see a full estimated repayment schedule to plan your capital needs and cash flow.

A 12-month profit and loss projection, also known as an income statement or statement of earnings, provides a detailed overview of your financial performance over a one-year period. This projection helps you anticipate future financial outcomes by estimating monthly income and expenses, which facilitates informed decision-making and strategic planning. 

If you’re trying to get a loan from a bank, they may ask you for a personal financial statement. You can use this free, downloadable template to document your assets, liabilities and net worth. 

A Personal Financial Statement is a snapshot of

Marketing helps your business build brand awareness, attract customers and create customer loyalty. Use these templates to forecast sales, develop your marketing strategy and map out your marketing budget and plan.

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SCORE offers free business mentoring to anyone that wants to start, currently owns, or is planning to close or sell a small business. To initiate the process, input your zip code in the designated area below. Then, complete the mentoring request form on the following page, including as much information as possible about your business. This information is used to match you with a mentor in your area. After submitting the request, you will receive an email from your mentor to arrange your first mentoring session.

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How to Write the Financial Section of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Taking Stock of Expenses

The income statement, the cash flow projection, the balance sheet.

The financial section of your business plan determines whether or not your business idea is viable and will be the focus of any investors who may be attracted to your business idea. The financial section is composed of four financial statements: the income statement, the cash flow projection, the balance sheet, and the statement of shareholders' equity. It also should include a brief explanation and analysis of these four statements.

Think of your business expenses as two cost categories: your start-up expenses and your operating expenses. All the costs of getting your business up and running should be considered start-up expenses. These may include:

• Business registration fees
• Business licensing and permits
• Starting inventory
• Rent deposits
• Down payments on a property
• Down payments on equipment
• Utility setup fees

Your own list will expand as soon as you start to itemize them.

Operating expenses are the costs of keeping your business running . Think of these as your monthly expenses. Your list of operating expenses may include:

• Salaries (including your own)
• Rent or mortgage payments
• Telecommunication expenses
• Raw materials
• Distribution
• Loan payments
• Office supplies
• Maintenance

Once you have listed all of your operating expenses, the total will reflect the monthly cost of operating your business. Multiply this number by six, and you have a six-month estimate of your operating expenses. Adding this amount to your total startup expenses list, and you have a ballpark figure for your complete start-up costs.

Now you can begin to put together your financial statements for your business plan starting with the income statement.

The income statement shows your revenues, expenses, and profit for a particular period—a snapshot of your business that shows whether or not your business is profitable. Subtract expenses from your revenue to determine your profit or loss.

While established businesses normally produce an income statement each fiscal quarter or once each fiscal year, for the purposes of the business plan, an income statement should be generated monthly for the first year.

Not all of the categories in this income statement will apply to your business. Eliminate those that do not apply, and add categories where necessary to adapt this template to your business.

If you have a product-based business, the revenue section of the income statement will look different. Revenue will be called sales, and you should account for any inventory.

The cash flow projection shows how cash is expected to flow in and out of your business. It is an important tool for cash flow management because it indicates when your expenditures are too high or if you might need a short-term investment to deal with a cash flow surplus. As part of your business plan, the cash flow projection will show how  much capital investment  your business idea needs.

For investors, the cash flow projection shows whether your business is a good credit risk and if there is enough cash on hand to make your business a good candidate for a line of credit, a  short-term loan , or a longer-term investment. You should include cash flow projections for each month over one year in the financial section of your business plan.

Do not confuse the cash flow projection with the cash flow statement. The cash flow statement shows the flow of cash in and out of your business. In other words, it describes the cash flow that has occurred in the past. The cash flow projection shows the cash that is anticipated to be generated or expended over a chosen period in the future.

There are three parts to the cash flow projection:

• Cash revenues: Enter your estimated sales figures for each month. Only enter the sales that are collectible in cash during each month you are detailing.
• Cash disbursements: Take the various expense categories from your ledger and list the cash expenditures you actually expect to pay for each month.
• Reconciliation of cash revenues to cash disbursements: This section shows an opening balance, which is the carryover from the previous month's operations. The current month's revenues are added to this balance, the current month's disbursements are subtracted, and the adjusted cash flow balance is carried over to the next month.

The balance sheet reports your business's net worth at a particular point in time. It summarizes all the financial data about your business in three categories:

• Assets:  Tangible objects of financial value that are owned by the company.
• Liabilities: Debt owed to a creditor of the company.
• Equity: The net difference when the  total liabilities  are subtracted from the total assets .

The relationship between these elements of financial data is expressed with the equation: Assets = Liabilities + Equity .

For your  business plan , you should create a pro forma balance sheet that summarizes the information in the income statement and cash flow projections. A business typically prepares a balance sheet once a year.

Once your balance sheet is complete, write a brief analysis for each of the three financial statements. The analysis should be short with highlights rather than an in-depth analysis. The financial statements themselves should be placed in your business plan's appendices.

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Free Income Statement Template

As a business owner, you know how important it is to keep your numbers in check. Knowing how much revenue is coming in, how much money is going out, and how much profit you are making is essential to making smart business decisions.That’s why you need an accounting system that helps you stay organized. With the free Income Statement template from FreshBooks, you have everything you need to track your income and more.

Simply download the template in your chosen format, customize and save. You’ll have a complete sheet to save for your records and a simple way to stay on top of your numbers.

Get a Free Invoice Statement Template

If you want your business to thrive, you’ll need a straightforward way to track ytehour numbers. Good news is, the free invoice statement template from FreshBooks is here to help you get a grasp on your bookkeeping.

You can download your free income statement template in the format that suits you best. If you like using spreadsheets, you can use the free Microsoft Excel or Google Sheets invoice statement to get started.

With the free income statement excel template, you’ll gain access to a helpful income statement formula. This can be hugely rewarding if you don’t have the time or means to structure one yourself.

The blank income statement has customizable fields for you to plug in your revenue and expenses. From there, you can calculate your profit or loss for the given period. A profit or loss statement is a crucial component of understanding a company’s financial health and can assist when making important decisions on how to run a business.

Some business owners even create monthly income, quarterly or yearly statements. No matter how often you want to calculate your profit or loss, the FreshBooks income statement example will be a helpful resource for you.

Available for download in .DOC, .PDF, .WORD, Google Docs and Google Sheets.

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What is an Invoice Statement?

Why use an income statement.

• How Do I Fill In an Invoice Statement?

Frequently Asked Questions

Benefits of freshbooks accounting, get started with freshbooks.

An invoice statement is an accounting report that is used to list your net income or business expenses, which would be either profit or loss. This statement is also commonly referred to as a “profit and loss report” or “P&L” statement.

You can generate an invoice statement whenever you choose, but they are typically used to report your business’s financial activity during a designated accounting period, such as per month, quarter, or year.

The invoice statement template serves as a great guideline to make sure you’re including all of the proper information on your income and expense statement.

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The success of your business depends on you making informed decisions. That’s why having your business financials organized and on-hand is one of the best things you can do to get started on the right track.

An income statement will show you exactly what your net profit is and will help you determine whether you need to decrease your costs or increase your revenue to stay in the black. Sound simple? Use the FreshBooks income and expense template to get started.

Take Control of Your Accounting with FreshBooks

How do i fill in an income statement.

Want to create your own Income Statement in minutes? Simply download the financial statement template and follow the steps below to get started.

Choose a File Format

Choose one of our invoice statement template formats.

Download Template

Once you’ve chosen which template to use, download it to your device.

Add Your Branding

Add your business name and logo at the top. Change the fonts to match your branding.

Fill in Revenue

Create revenue subcategories. Fill them in and calculate total revenue.

Fill in Expenses

Customize the expense subcategories and fill them in. Calculate the total costs.

Calculate Net Income

Determine whether you’ve made a profit or a loss. Subtract expenses from revenue.

Check Out Our Other Accounting Sheets

There is more to accounting than determining if you’ve turned a profit. You need to see where each dollar has come from or gone to. That’s why FreshBooks provides a number of other sample accounting sheets.

• Profit and Loss Templates
• Expense Report Templates
• Simple Balance Sheet Templates
• General Ledger Templates
• Income Statement Templates
• Billing Statement Templates
• Bank Reconciliation Templates

Income statements are used to compare your revenue to your expenses to determine if you have made a profit or a loss. Creating income statements will help you track your income, net profit and more to keep you organized.

When creating your own income statement, you’ll want to include a breakdown of your revenue, expenses, and net income.

The income and expense statement template from FreshBooks includes blank, easy-to-use fields for all of the information that you need to include.

Net income is calculated by subtracting expenses from income. If the number is positive, you have a profit and if it’s negative, you have a loss.

Most definitely. FreshBooks has other free resources, such as general ledger templates, expense reports and more.

Our free accounting resources, including the free income statement format, are designed for business owners looking to take a do-it-yourself approach to accounting. But the FreshBooks cloud accounting software is a much more powerful and efficient resource that’s designed to help businesses save money and time on their bookkeeping.

The resources that are included in the FreshBooks cloud accounting software are a lifesaver for business owners who want a thorough understanding of their company’s finances. Keeping your accounts organized is a fundamental part of any healthy business plan, and that’s where a practical, fully customizable bookkeeping resource comes in.

FreshBooks offers cleverly-designed accounting reporting features that can help any business easily keep track of their finances, including their revenue and losses. You’ll gain unlimited access to practical financial templates that are the backbone of business planning and will help you keep track of your critical business activities.

If you’re looking for more free templates to help keep your business running as smoothly as possible, check out some of the other free templates on the FreshBooks website. 

An income statement or balance sheet is a necessary financial document that tracks how much money is coming in and out of a business, and with the free balance sheet template from FreshBooks, every dollar will be accounted for. 

A small business income statement showcases a company’s revenue and expense over the course of a specific time frame. FreshBooks provides a specialized small business income statement template, perfect for any small business owner who requires accuracy and is looking for efficiency in their accounting.

Take control of your finances and automate your bookkeeping with FreshBooks. You can get back to business and start running your company the way it deserves.

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How To Create Financial Projections for Your Business Plan

Building a financial projection as you write out your business plan can help you forecast how much money your business will bring in.

Planning for the future, whether it’s with growth in mind or just staying the course, is central to being a business owner. Part of this planning effort is making financial projections of sales, expenses, and—if all goes well—profits.

Even if your business is a startup that has yet to open its doors, you can still make projections. Here’s how to prepare your business plan financial projections, so your company will thrive.

What are business plan financial projections?

Business plan financial projections are a company’s estimates, or forecasts, of its financial performance at some point in the future. For existing businesses, draw on historical data to detail how your company expects metrics like revenue, expenses, profit, and cash flow to change over time.

Companies can create financial projections for any span of time, but typically they’re for between one and five years. Many companies revisit and amend these projections at least annually. 

Creating financial projections is an important part of building a business plan . That’s because realistic estimates help company leaders set business goals, execute financial decisions, manage cash flow , identify areas for operational improvement, seek funding from investors, and more.

What are financial projections used for? 

Financial forecasting serves as a useful tool for key stakeholders, both within and outside of the business. They often are used for:

Business planning

Accurate financial projections can help a company establish growth targets and other goals . They’re also used to determine whether ideas like a new product line are financially feasible. Future financial estimates are helpful tools for business contingency planning, which involves considering the monetary impact of adverse events and worst-case scenarios. They also provide a benchmark: If revenue is falling short of projections, for example, the company may need changes to keep business operations on track.

Projections may reveal potential problems—say, unexpected operating expenses that exceed cash inflows. A negative cash flow projection may suggest the business needs to secure funding through outside investments or bank loans, increase sales, improve margins, or cut costs.

When potential investors consider putting their money into a venture, they want a return on that investment. Business projections are a key tool they will use to make that decision. The projections can figure in establishing the valuation of your business, equity stakes, plans for an exit, and more. Investors may also use your projections to ensure that the business is meeting goals and benchmarks.

Loans or lines of credit 

Lenders rely on financial projections to determine whether to extend a business loan to your company. They’ll want to see historical financial data like cash flow statements, your balance sheet , and other financial statements—but they’ll also look very closely at your multi-year financial projections. Good candidates can receive higher loan amounts with lower interest rates or more flexible payment plans.

Lenders may also use the estimated value of company assets to determine the collateral to secure the loan. Like investors, lenders typically refer to your projections over time to monitor progress and financial health.

What information is included in financial projections for a business?

Before sitting down to create projections, you’ll need to collect some data. Owners of an existing business can leverage three financial statements they likely already have: a balance sheet, an annual income statement , and a cash flow statement .

A new business, however, won’t have this historical data. So market research is crucial: Review competitors’ pricing strategies, scour research reports and market analysis , and scrutinize any other publicly available data that can help inform your projections. Beginning with conservative estimates and simple calculations can help you get started, and you can always add to the projections over time.

One business’s financial projections may be more detailed than another’s, but the forecasts typically rely on and include the following:

True to its name, a cash flow statement shows the money coming into and going out of the business over time: cash outflows and inflows. Cash flows fall into three main categories:

Income statement

Projected income statements, also known as projected profit and loss statements (P&Ls), forecast the company’s revenue and expenses for a given period.

Generally, this is a table with several line items for each category. Sales projections can include the sales forecast for each individual product or service (many companies break this down by month). Expenses are a similar setup: List your expected costs by category, including recurring expenses such as salaries and rent, as well as variable expenses for raw materials and transportation.

This exercise will also provide you with a net income projection, which is the difference between your revenue and expenses, including any taxes or interest payments. That number is a forecast of your profit or loss, hence why this document is often called a P&L.

Balance sheet

A balance sheet shows a snapshot of your company’s financial position at a specific point in time. Three important elements are included as balance sheet items:

• Assets. Assets are any tangible item of value that the company currently has on hand or will in the future, like cash, inventory, equipment, and accounts receivable. Intangible assets include copyrights, trademarks, patents and other intellectual property .
• Liabilities. Liabilities are anything that the company owes, including taxes, wages, accounts payable, dividends, and unearned revenue, such as customer payments for goods you haven’t yet delivered.
• Shareholder equity. The shareholder equity figure is derived by subtracting total liabilities from total assets. It reflects how much money, or capital, the company would have left over if the business paid all its liabilities at once or liquidated (this figure can be a negative number if liabilities exceed assets). Equity in business is the amount of capital that the owners and any other shareholders have tied up in the company.

They’re called balance sheets because assets always equal liabilities plus shareholder equity. 

5 steps for creating financial projections for your business

• Identify the purpose and timeframe for your projections
• Collect relevant historical financial data and market analysis
• Forecast expenses
• Forecast sales
• Build financial projections

The following five steps can help you break down the process of developing financial projections for your company:

1. Identify the purpose and timeframe for your projections

The details of your projections may vary depending on their purpose. Are they for internal planning, pitching investors, or monitoring performance over time? Setting the time frame—monthly, quarterly, annually, or multi-year—will also inform the rest of the steps.

2. Collect relevant historical financial data and market analysis

If available, gather historical financial statements, including balance sheets, cash flow statements, and annual income statements. New companies without this historical data may have to rely on market research, analyst reports, and industry benchmarks—all things that established companies also should use to support their assumptions.

3. Forecast expenses

Identify future spending based on direct costs of producing your goods and services ( cost of goods sold, or COGS) as well as operating expenses, including any recurring and one-time costs. Factor in expected changes in expenses, because this can evolve based on business growth, time in the market, and the launch of new products.

4. Forecast sales

Project sales for each revenue stream, broken down by month. These projections may be based on historical data or market research, and they should account for anticipated or likely changes in market demand and pricing.

5. Build financial projections

Now that you have projected expenses and revenue, you can plug that information into Shopify’s cash flow calculator and cash flow statement template . This information can also be used to forecast your income statement. In turn, these steps inform your calculations on the balance sheet, on which you’ll also account for any assets and liabilities .

Business plan financial projections FAQ

What are the main components of a financial projection in a business plan.

Generally speaking, most financial forecasts include projections for income, balance sheet, and cash flow.

What’s the difference between financial projection and financial forecast?

These two terms are often used interchangeably. Depending on the context, a financial forecast may refer to a more formal and detailed document—one that might include analysis and context for several financial metrics in a more complex financial model.

Do I need accounting or planning software for financial projections?

Not necessarily. Depending on factors like the age and size of your business, you may be able to prepare financial projections using a simple spreadsheet program. Large complicated businesses, however, usually use accounting software and other types of advanced data-management systems.

What are some limitations of financial projections?

Projections are by nature based on human assumptions and, of course, humans can’t truly predict the future—even with the aid of computers and software programs. Financial projections are, at best, estimates based on the information available at the time—not ironclad guarantees of future performance.

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Business Plan Example and Template

Learn how to create a business plan

What is a Business Plan?

A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing .

A business plan should follow a standard format and contain all the important business plan elements. Typically, it should present whatever information an investor or financial institution expects to see before providing financing to a business.

Contents of a Business Plan

A business plan should be structured in a way that it contains all the important information that investors are looking for. Here are the main sections of a business plan:

1. Title Page

The title page captures the legal information of the business, which includes the registered business name, physical address, phone number, email address, date, and the company logo.

2. Executive Summary

The executive summary is the most important section because it is the first section that investors and bankers see when they open the business plan. It provides a summary of the entire business plan. It should be written last to ensure that you don’t leave any details out. It must be short and to the point, and it should capture the reader’s attention. The executive summary should not exceed two pages.

3. Industry Overview

The industry overview section provides information about the specific industry that the business operates in. Some of the information provided in this section includes major competitors, industry trends, and estimated revenues. It also shows the company’s position in the industry and how it will compete in the market against other major players.

4. Market Analysis and Competition

The market analysis section details the target market for the company’s product offerings. This section confirms that the company understands the market and that it has already analyzed the existing market to determine that there is adequate demand to support its proposed business model.

Market analysis includes information about the target market’s demographics , geographical location, consumer behavior, and market needs. The company can present numbers and sources to give an overview of the target market size.

A business can choose to consolidate the market analysis and competition analysis into one section or present them as two separate sections.

5. Sales and Marketing Plan

The sales and marketing plan details how the company plans to sell its products to the target market. It attempts to present the business’s unique selling proposition and the channels it will use to sell its goods and services. It details the company’s advertising and promotion activities, pricing strategy, sales and distribution methods, and after-sales support.

6. Management Plan

The management plan provides an outline of the company’s legal structure, its management team, and internal and external human resource requirements. It should list the number of employees that will be needed and the remuneration to be paid to each of the employees.

Any external professionals, such as lawyers, valuers, architects, and consultants, that the company will need should also be included. If the company intends to use the business plan to source funding from investors, it should list the members of the executive team, as well as the members of the advisory board.

7. Operating Plan

The operating plan provides an overview of the company’s physical requirements, such as office space, machinery, labor, supplies, and inventory . For a business that requires custom warehouses and specialized equipment, the operating plan will be more detailed, as compared to, say, a home-based consulting business. If the business plan is for a manufacturing company, it will include information on raw material requirements and the supply chain.

8. Financial Plan

The financial plan is an important section that will often determine whether the business will obtain required financing from financial institutions, investors, or venture capitalists. It should demonstrate that the proposed business is viable and will return enough revenues to be able to meet its financial obligations. Some of the information contained in the financial plan includes a projected income statement , balance sheet, and cash flow.

9. Appendices and Exhibits

The appendices and exhibits part is the last section of a business plan. It includes any additional information that banks and investors may be interested in or that adds credibility to the business. Some of the information that may be included in the appendices section includes office/building plans, detailed market research , products/services offering information, marketing brochures, and credit histories of the promoters.

Business Plan Template

Here is a basic template that any business can use when developing its business plan:

Section 1: Executive Summary

• Present the company’s mission.
• Describe the company’s product and/or service offerings.
• Give a summary of the target market and its demographics.
• Summarize the industry competition and how the company will capture a share of the available market.
• Give a summary of the operational plan, such as inventory, office and labor, and equipment requirements.

Section 2: Industry Overview

• Describe the company’s position in the industry.
• Describe the existing competition and the major players in the industry.
• Provide information about the industry that the business will operate in, estimated revenues, industry trends, government influences, as well as the demographics of the target market.

Section 3: Market Analysis and Competition

• Define your target market, their needs, and their geographical location.
• Describe the size of the market, the units of the company’s products that potential customers may buy, and the market changes that may occur due to overall economic changes.
• Give an overview of the estimated sales volume vis-à-vis what competitors sell.
• Give a plan on how the company plans to combat the existing competition to gain and retain market share.

Section 4: Sales and Marketing Plan

• Describe the products that the company will offer for sale and its unique selling proposition.
• List the different advertising platforms that the business will use to get its message to customers.
• Describe how the business plans to price its products in a way that allows it to make a profit.
• Give details on how the company’s products will be distributed to the target market and the shipping method.

Section 5: Management Plan

• Describe the organizational structure of the company.
• List the owners of the company and their ownership percentages.
• List the key executives, their roles, and remuneration.
• List any internal and external professionals that the company plans to hire, and how they will be compensated.
• Include a list of the members of the advisory board, if available.

Section 6: Operating Plan

• Describe the location of the business, including office and warehouse requirements.
• Describe the labor requirement of the company. Outline the number of staff that the company needs, their roles, skills training needed, and employee tenures (full-time or part-time).
• Describe the manufacturing process, and the time it will take to produce one unit of a product.
• Describe the equipment and machinery requirements, and if the company will lease or purchase equipment and machinery, and the related costs that the company estimates it will incur.
• Provide a list of raw material requirements, how they will be sourced, and the main suppliers that will supply the required inputs.

Section 7: Financial Plan

• Describe the financial projections of the company, by including the projected income statement, projected cash flow statement, and the balance sheet projection.

Section 8: Appendices and Exhibits

• Quotes of building and machinery leases
• Proposed office and warehouse plan
• Market research and a summary of the target market
• Credit information of the owners
• List of product and/or services

Related Readings

Thank you for reading CFI’s guide to Business Plans. To keep learning and advancing your career, the following CFI resources will be helpful:

• Corporate Structure
• Three Financial Statements
• Business Model Canvas Examples
• See all management & strategy resources
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• Income Statement

41 FREE Income Statement Templates & Examples

The income statement is one of three key financial statements used by all companies , from small businesses to large corporations. While income statements may seem overwhelming at first, they are an essential part of doing business, and you will soon appreciate the valuable information they provide for your company. When utilized together, the income statement, balance sheet, and statement of cash flows provide a clear picture of your company’s overall financial status, serving as helpful tools for analysis, planning, and decision-making.

What is an income statement?

An income statement shows the income and expenses of a company over a specified period of time. Investors and business managers use the income statement to determine the profitability of the company . It is one of three major financial statements required by GAAP (generally accepted accounting principles).

According to Black’s Law Dictionary , the definition of a basic income statement is:

A simple way to track expenses and income using one line terms with a single total at the bottom.

Table of Contents

• 1 What is an income statement?
• 2.1 Simple/Basic Income Statement
• 2.2 Single-Step Income Statement
• 2.3 Multi-Step Income Statement
• 2.4 Pro forma Income Statement
• 2.5 Common Size Income Statement
• 2.6 Contribution Margin Income Statement
• 2.7 Absorption Costing Income Statement
• 2.8 Variable Costing Income Statement
• 2.9 Partial Income Statement
• 2.10 CVP Income Statement
• 2.11 Segmented Income Statement
• 2.12 Comparative Income Statement
• 2.13 Projected Income Statement
• 2.14 Consolidated Income Statement
• 3 Income Statement Examples
• 4 What is included in the income statement?
• 5.1 Single-Step Income Statement
• 5.2 Multi-Step Income Statement
• 6 Income Statement Templates
• 7.1 Income Statement vs Balance Sheet
• 7.2 Profit and Loss vs Income Statement
• 7.3 Single-Step vs Multi-Step Income Statement
• 7.4 Absorption Costing vs Variable Costing Income Statement
• 7.5 Cash Flow vs Income Statement
• 8 Sample Income Statement
• 9.1 Absorption Costing Income Statement
• 9.2 Variable Costing Income Statement
• 9.3 Partial Income Statement
• 9.4 CVP Income Statement
• 9.5 Segmented Income Statement
• 9.6 Comparative Income Statement
• 9.7 Projected Income Statement
• 9.8 Consolidated Income Statement
• 10 Income Statement Examples
• 11 What is included in the income statement?
• 12.1 Single-Step Income Statement
• 12.2 Multi-Step Income Statement
• 13 Income Statement Templates
• 14.1 Income Statement vs Balance Sheet
• 14.2 Profit and Loss vs Income Statement
• 14.3 Single-Step vs Multi-Step Income Statement
• 14.4 Absorption Costing vs Variable Costing Income Statement
• 14.5 Cash Flow vs Income Statement
• 15 Sample Income Statement
• 16 Income Statement FAQs

Types of Income Statements

Simple/basic income statement.

A simple or basic income statement may only include income, expenses, and net profit (or loss). For most small businesses, a simple income statement is sufficient for internal reporting. However, investors may request a more complex income statement.

Single-Step Income Statement

A single-step income statement is a basic income statement that lists all revenues together, followed by all expenses together, with net profit (or loss) as the closing line item. These income statements are often used by both small and large companies. However, they only provide a general overview of the company’s financial position, so many larger companies require a more complex income statement.

Multi-Step Income Statement

A multi-step income statement is more complex than a single-step income statement, but it also provides a more thorough overview of the company’s financial position. With these statements, operating and non-operating activities are listed separately. Gross profit, operating income, non-operating income, and net income balancing figures are also listed as individual line items.

Pro forma Income Statement

A pro forma income statement is based on projections or possibilities . Companies often use pro forma income statements to forecast what may happen in anticipation of an event. For example, if the company is considering a merger, a pro forma income statement may be prepared to determine the profitability of the merger.

Common Size Income Statement

A common size income statement is used to analyze how each separate item on an income statement affects the company’s overall profit. Because these income statements are used primarily for analysis, each account is shown as a percentage of the total value of sales rather than an actual dollar amount.

Contribution Margin Income Statement

A product’s contribution margin is the unit price minus all associated variable costs per unit. A company’s total contribution margin includes all earnings available to pay for fixed expenses. If there are any earnings remaining, the difference is considered profit. A contribution income statement is generally only used for internal reporting as a tool for planning and analyzing product costs. It is helpful for determining a company’s “break-even” point.

Absorption Costing Income Statement

Absorption costing is the standard format for income statements. It is the required format for external reporting according to GAAP. With absorption costing, all manufacturing expenses are considered part of product costs.

Variable Costing Income Statement

Companies sometimes use variable costing for internal reporting of financial statements. With variable costing, only direct costs (materials, labor, overhead variances) are considered part of product costs. The remaining overhead manufacturing expenses are considered periodic expenses and deducted from the gross profit for that period.

Partial Income Statement

A partial income statement is a special type of income statement that only reports financial information for a specific period of time. “Partial” does not refer to the information provided within the income statement because these income statements typically report all the same information as a full income statement. Instead, the term “partial” is used because these income statements are only used to report part of a typical financial period.

CVP Income Statement

Cost-Volume-Profit income statements are specialized internal financial statements used to analyze the profitability of various production scenarios. The format may vary from one company to the next but typically includes fixed expenses, variable expenses, revenue, and contribution margins.

Segmented Income Statement

A segmented income statement shows the same information as a standard income statement, but only for a specific segment of the company. For example, the segment might be a particular product line or branch of the company’s overall operations. These income statements are typically used to determine the profitability of a certain segment of a company. Management may use a segmented income statement for analysis and decision-making, such as whether it is in the company’s best interests to drop a product line or close a branch.

Comparative Income Statement

A comparative income statement compiles income statements for multiple periods into one document using separate columns for easy analysis. For example, a comparative income statement might include the months of January, February, and March, with separate column headings and a full income statement prepared for each month. Using this information, management can easily spot dips and surges in revenue, expenses, and overall profit over the course of time.

Projected Income Statement

A projected income statement is used for budgetary purposes. Instead of using historical numbers from a certain period of time, this type of income statement uses projected figures for a future period. It is prepared similarly to a pro forma income statement, but they are not the same type of document. A pro forma statement uses projections based upon a possible event, whereas a projected income statement assumes operations continue as usual.

Consolidated Income Statement

A parent company with subsidiaries may use a consolidated income statement to show an overview of the entire company’s financial position as a whole. With this type of income statement, the revenue, expenses, and income of the parent and all its subsidiaries are combined together into one document.

Income Statement Examples

What is included in the income statement?

The income statement is a fairly simple document that is used to show the company’s overall financial performance. According to GAAP, it should be clear and concise, listing the following:

• Revenue: Revenue is the income a company receives during the stated period. This should include income from all sources.
• Expenses: Expenses include any cost the company incurs during the stated period. This includes COGS (Cost of Goods Sold), operating expenses, etc.
• Gains/Losses: Gains and losses from non-operating activities are also included. These are usually investment-related activities, though other gains and losses may be included as well.

How to Prepare an Income Statement

There are two primary ways to prepare an income statement. The single-step income statement is simple to prepare and offers an overview of the company’s financial position. The multi-step income statement is a little more complicated to prepare and offers a more detailed view of the company’s financial position.

Most small companies use a single-step income statement. This type of income statement typically has three main sections:

• Revenues: All of the company’s revenues (or income) should be summarized and totaled first.
• Expenses: Next, all of the company’s expenses should be listed and totaled.
• Net income: The bottom line of the income statement should state whether the company had a net gain or a net loss. This is called “net income.” To arrive at this number, the total expenses are subtracted from the total revenue. (This number is also casually referred to as “the bottom line.”)

Larger companies or companies that sell tangible goods usually use the multi-step income statement, which provides more detail about income and expenses from specific activities.

With a multi-step income statement, operating revenue and expenses are separated from non-operating revenue and expenses. A multi-step income statement also includes a line item for gross profit.

The sections of a multi-step income statement include:

• Sales: The total sales of the company, the Cost of Goods Sold (COGS), and the resulting gross profit.
• Operating expenses: A breakdown of all of the operating expenses of a company, which includes Selling, General, and Administrative Expenses (SG&A).
• Operating income: The difference between gross profit and total operating expenses.
• Non-Operating/Other: Any revenue, expense, gain, or loss related to non-operating activities, such as investments.
• Net income: Any resulting net profit or loss calculated as a total of operating income plus non-operating income.

Income Statement Templates

The Differences Between Common Accounting Terms

Income statement vs balance sheet.

Profit and Loss vs Income Statement

Single-Step vs Multi-Step Income Statement

Absorption Costing vs Variable Costing Income Statement

Cash Flow vs Income Statement

Sample Income Statement

Income Statement FAQs

What is the order of the subtotals that appear on a multi-step income statement?

The subtotals should appear in the following order:

• Gross profit
• Operating income
• Other revenues and expenses (non-operating)

Where are selling and administrative expenses found on the multi-step income statement?

Selling and administrative expenses should be listed as individual line items under operating expenses.

What is an advantage of using the multi-step income statement?

The primary advantage of the multi-step income statement is the amount of information it provides. Unlike the single-step income statement, the multi-step income statement includes gross profit and separates operating income from non-operating income for clearer analysis.

How do you calculate COGS (Cost of Goods Sold) for an income statement?

The Cost of Goods Sold formula is:

Where is depreciation expense found on the income statement?

Depreciation expense is listed under “Expenses” on a single-step income statement and listed under “Operating Expenses” on a multi-step income statement.

Where is interest expense listed on the income statement?

Interest expense is listed under “Expenses” on a single-step income statement and listed under “Non-Operating or Other” on a multi-step income statement.

How do you calculate interest expense for an income statement?

The interest expense formula is:

Where is bad debt expense reported on the income statement?

Bad debt expense is listed under “Expenses” on the single-step income statement and listed under “Operating Expenses” on the multi-step income statement.

What time period does an income statement cover?

An income statement may cover any specific time period, from a day to multiple years. Most companies prepare income statements quarterly or yearly. However, it’s not uncommon for businesses to prepare income statements more often.

Why is the income statement important?

The income statement shows the overall financial performance of a company within a stated period of time. It is arguably the most important financial statement and is often used for analysis and planning of all aspects of the business. A fina

The income statement shows the overall financial performance of a company within a stated period of time. It is arguably the most important financial statement and is often used for analysis and planning of all aspects of the business. A financial statement is often the first document prepared for both internal and external reporting because it gives the best overall picture of a company’s financial health and viability.

How is the income statement of a merchandising company different from that of a service company?

The income statement for a service company is generally less complex than the income statement for a merchandising company. A merchandising company may include COGS, refunds and returns, discounts, and more. Because a service company does not deal with tangible materials, these sections are unnecessary. However, a service company may have other expenses to consider, such as travel, promotional materials, etc.

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How to Create a Profit and Loss Forecast

Angelique O'Rourke

7 min. read

Updated May 10, 2024

An income statement, also called a profit and loss statement (or P&L), is a fundamental tool for understanding how the revenue and expenses of your business stack up.

Simply put, it tells anyone at-a-glance if your business is profitable or not. Typically, an income statement is a list of revenue and expenses, with the company’s net profit listed at the end (check out the  section on income statement examples below  to see what it looks like). 

Have you ever heard someone refer to a company’s “bottom line”? They’re talking about the last line in an income statement, the one that tells a reader the net profit of a company, or how profitable the company is over a given period of time (usually quarterly or annually) after all expenses have been accounted for.

This is the “profit” referred to when people say “profit and loss statement,” or what the “p” stands for in “P & L.” The “loss” is what happens when your expenses exceed your revenue; when a company is not profitable and therefore running at a loss.

As you read on, keep in mind that cash and profits aren’t the same thing. For more on how they’re different,  check out this article .

What’s included in an income statement?

The top line of your profit and loss statement will be the money that you have coming in, or your revenue from sales. This number should be your initial revenue from sales without any deductions.

The top line of your income statement is really just as important as the bottom line; all of the direct costs and expenses will be taken out of this beginning number. The smaller it is, the smaller the expenses have to be if you’re going to stay in the black.

If you’re  writing a business plan  document and don’t yet have money coming in, you might be wondering how you would arrive at a sales number for a financial forecast. It’s normal for the financials of a business plan to be your best educated guess at what the next few years of numbers will be. No one can predict the future, but you can make a reasonable plan.

Check out this article about forecasting sales  for more information.

Direct costs

Direct costs, also referred to as the cost of goods sold, or COGS, is just what it sounds like: How much does it cost you to make the product or deliver the service related to that sale? You wouldn’t include items such as rent for an office space in this area, but the things that directly contribute to the product you sell.

For example, to a bookstore, the direct cost of sales is what the store paid for the books it sold; but to a publisher, its direct costs include authors’ royalties, printing, paper, and ink. A manufacturer’s direct costs include materials and labor. A reseller’s direct costs are what the reseller paid to purchase the products it’s selling.

If you only sell services, it’s possible that you have no direct costs or very low direct costs as a percentage of sales; but even accountants and attorneys have subcontractors, research, and photocopying that can be included in direct costs.

Here’s a simple rule of thumb to distinguish between direct costs and regular expenses: If you pay for something, regardless of whether you make 1 sale or 100 sales, that’s a regular expense. Think salaries, utilities, insurance, and rent. If you only pay for something when you make a sale, that’s a direct cost. Think inventory and paper reports you deliver to clients.

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Gross margin

Gross margin is also referred to as gross profit. This number refers to the difference between the revenue and direct costs on your income statement.

Revenue – Direct Costs = Gross Margin

This number is very important because it conveys two critical pieces of information: 1.) how much of your revenue is being funneled into direct costs (the smaller the number, the better), and 2.) how much you have left over for all of the company’s other expenses. If the number after direct costs is smaller than the total of your operating expenses, you’ll know immediately that you’re not profitable.

Operating expenses

Operating expenses are where you list all of your regular expenses as line items, excluding your costs of goods sold.

So, you have to take stock of everything else your company pays for to keep the doors open: rent, payroll, utilities, marketing—include all of those fixed expenses here.

Remember that each individual purchase doesn’t need its own line item. For ease of reading, it’s better to group things together into categories of expenses—for example, office supplies, or advertising costs.

Operating income

Operating income is also referred to as EBITDA, or earnings before interest, taxes, depreciation, and amortization. You calculate your operating income by subtracting your total operating expenses from your gross margin.

Gross Margin – Operating Expenses = Operating Income

Operating income is considered the most reliable number reflecting a company’s profitability. As such, this is a line item to keep your eye on, especially if you’re  presenting to investors . Is it a number that inspires confidence?

This is fairly straightforward—here you would include any interest payments that the company is making on its loans. If this doesn’t apply to you, skip it.

Depreciation and amortization

These are non-cash expenses associated with your assets, both tangible and intangible. Depreciation is an accounting concept based on the idea that over time, a tangible asset, like a car or piece of machinery, loses its value, or depreciates. After several years, the asset will be worth less and you record that change in value as an expense on your P&L.

With intangible assets, you’ll use a concept called amortization to write off their cost over time. An example here would be a copyright or patent that your business might purchase from another company. If the patent lasts for 20 years and it cost your company $1 million to purchase the patent, you would then expense 1/20th of the cost every year for the life of the patent. This expense for an intangible asset would be included in the amortization row of the income statement.

This will reflect the income tax amount that has been paid, or the amount that you expect to pay, depending on whether you are recording planned or actual values. Some companies  set aside an estimated amount of money  to cover this expected expense.

Total expenses

Total expenses is exactly what it sounds like: it’s the total of all of your expenses, including interest, taxes, depreciation, and amortization.

The simplest way to calculate your total expenses is to just take your direct costs, add operating expenses, and then add the additional expenses of interest, taxes, depreciation, and amortization:

Total Expenses = Direct Costs + Operating Expenses + Interest + Taxes + Depreciation + Amortization

Net profit, also referred to as net income or net earnings, is the proverbial bottom line. This is the at-a-glance factor that will determine the answer to the question, are you in the red? You calculate net profit by subtracting total expenses from revenue:

Net Profit = Revenue – Total Expenses

Remember that this number started at the top line, with your revenue from sales. Then everything else was taken out of that initial sum. If this number is negative, you’ll know that you’re running at a loss. Either your expenses are too high, you’re revenue is in a slump, or both—and it might be time to reevaluate strategy.

• Income statement examples

Because the terminology surrounding income statements is variable and all businesses are different, not all of them will look exactly the same, but the core information of revenue minus all expenses (including direct costs) equals profit will be present in each one.

Here is an income statement from Nike, to give you a general idea:

An  income statement from Nike .

As you can see, while Nike uses a variety of terms to explain what their expenses are and name each line item as clearly as possible, the takeaway is still the bottom line, their net income.

Angelique is a skilled writer, editor, and social media specialist, as well as an actor and model with a demonstrated history of theater, film, commercial and print work.

Table of Contents

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Free income statement template

• Download income statement template
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An income statement is a summary of your business income and expenses during a given time period. This free income statement template makes it easy to create an income statement for your business. Simply plug your numbers into the template and you're ready to go.

Accurately track your income and expenses

Record revenue, COGS and indirect expenses to calculate your net profit or loss before taxes.

Clear and friendly design for your business

Just put in your numbers and the calculations are done for you in an income statement format.

Save and keep to use again

Reusable so you can compare with previous saved statements to see how your business is tracking.

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Understanding an income statement for your business

An income statement is a financial report that shows a business's profits or losses over a set period of time. It summarizes the business's income and expenses, and typically shows profits both before and after taxes. Monthly, quarterly or yearly are the most common periods for a business to create an income statement.

An income statement often doesn’t report income tax. Instead, it reports profit or loss before tax. This profit or loss – which is on the last row of this free income statement template – is used to help calculate taxes. A business will generally be taxed on its profits. If you have an income statement that shows income taxes, that amount will then be subtracted to give a final figure that is net profit after tax.

The most important part of an income statement is the bottom line. It shows how much your business earned or lost during the time period used. If you have a profit, your business strategy is working. If you have a loss, you may need to take a closer look to see where the problem lies. Pay attention to your revenue, cost of goods sold, operating expenses, and taxes as they directly affect your bottom line and should be considered when planning your budget or making investments.

Yes, you can make an income statement with Excel or Google Sheets, but our simple income statement template is easier to complete and can be used over and over again. An even easier option is to use accounting software to generate your financial reports. With cloud-based software, you can access accurate, up-to-date numbers and financial reports from anywhere.

Why use our income statement template?

• Included Accurate financial tracking with fields for common business income and expense categories.
• Included Time-saving, reusable template that lets you plug in numbers quickly.
• Included Features the most important details about your business's profitability.
• Included Lets you identify where expenses can be reduced.

Our free income statement template is reusable and simple to use. You can create a statement for internal decision-making or to show lenders

How to format your income statement

Go to the download section on this page, fill in your details and we’ll send you an email with the template as a downloadable PDF. We’ll also send a guide on how to use it with a sample income statement. You’ll need to have a PDF reader installed to use the template.

Record your income and expenses in line with your accounting method. With the accrual method, you record revenue or expenses when you earn the money or incur the expense, but with the cash basis method, you don't record anything until the cash actually exchanges hands. You must be consistent about using one or the other if you want to create accurate reports.

Income statements cover specific periods of time such as weeks, months, quarters, or years. Consider looking at a variety of time periods to see how your business does during different intervals – for example, an annual report will show how your business did over a year, while quarterly and monthly income statements can help track seasonal trends. Make sure to use consistent date ranges when comparing different periods.

List all of your business's revenue from different sources in the designated fields, and the template will automatically calculate a total. Next, list your cost of sales and all of your fixed and variable expenses in their designated fields. Once you've entered everything, the template will subtract expenses from revenue to calculate your net profit before tax.

Your net profit before tax will be displayed at the bottom of the template. Use this number and the other details on your report to make informed decisions for your business. Understanding the profitability of your business at different time periods can help you create budgets and make smart financial decisions.

The final row of this income statement template will display the net profit before tax, which can be used to help calculate a business’s tax bill. This assumes that all the expenses listed on the income statement are deductible. Your tax office has details to help you understand what qualifies as being deductible and an accountant can also guide you.

Once you’ve created the statement, it's time to print and/or save it. You can use past income statements to track the history of your business's finances and compare with new reports to see how your business is improving.

Want to learn more about how to understand your income statement or check you're in line with local regulations? An accountant or bookkeeper can help you complete your income statement template and avoid mistakes.

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Income Statement Template for Financial Management in Excel

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Answer Your Frequently Asked Questions: Access Our Free Income Statement Template For Organized Revenue and Expense Presentation

Kristal Sepulveda, CPA

February 26, 2024

Preparing an income statement is essential for evaluating a company's financial performance. It aids in decision-making and ensures compliance with regulatory standards. Analyzing revenues, expenses, and net income over a specific period is important. Businesses can assess their profitability and identify areas for improvement. It also helps make informed strategic decisions. Also, income statements give investors, creditors, and other stakeholders valuable insights. This fosters transparency and trust in the company's financial management. Is there a secret to the efficient preparation of an income statement? The secret is Excel. Picture Excel as a trusty toolbox. As a bookkeeper , you're the handy craftsman crafting an income statement. With each click and keystroke, you assemble the financial framework of your business. It's like building a sturdy house of numbers. It's where every beam of revenue and expense fits snugly into place. Excel is your reliable hammer and nails. It helps you construct a clear view of your company's financial landscape.

Download Your Free Income Statement Template Here

What is an income statement template, and why is it important?

An income statement template is a financial statement that summarizes a business’s income and expenses over a specific period. It includes line items such as revenue, cost of goods sold, operating expenses, and net profit. An income statement is crucial for assessing a company’s financial health and business performance.

An income statement template, like the free template available for Microsoft Excel or Google Sheets, can help business owners track their monthly income and make informed decisions to reach their business goals. It also aids in creating a cash flow statement and analyzing the business's profit and loss.

By monitoring the profit and loss statement with a simple income statement template, businesses can add or remove expenses to improve their financial report. A multi-step income statement covers the gross profit and presents a clearer picture of the business’s financial situation.

Understanding the Basics of an Income Statement

For a small business owner, creating your own income statement is essential to understand the business's financial performance. It is also called a profit and loss statement, and it helps analyze the business profit by comparing the revenues and expenses to determine the net profitability of the business.

There are different types of income statements, such as single-step income and multi-step income. You can use a simple income statement template or a monthly income statement template to track your finances. You can find free templates online or use a free Excel template to organize financial information in a clear format.

Further Reading: Understanding the Multi-Step Income Statement

Benefits of Using an Income Statement Template

Income statement templates can help smart businesses track their income and expenses monthly. Using this financial document, you can easily create monthly income statements to analyze the net profitability of your business. An income statement is an essential financial statement used in a business plan to show the profit or loss over a specific period.

Using an income statement template, you can easily download a free example income statement to customize for your business. The income is calculated using the income statement format, also known as a P&L or statement of operations. This financial statement helps you track your income and expenses to determine the financial health of your business.

How to Analyze Revenue and Expenses Using an Income Statement

Income statement serves as a tool used to report the financial data of a business during a specific period of time. Business owners looking to analyze the net profitability of a business can use this income statement to assess their revenue and expenses. An income statement example shows the necessary financial information in a structured format.

The income statement template helps create an income statement that can be used for business reports. By removing line items that are not relevant, business owners can focus on the key components of their revenue and expenses. The income statement helps in answering frequently asked questions about the financial performance of a business.

How to Create and Customize Your Small Business Income Statement ‍

Income statement template for excel.

This template offers two options: a single-step income statement and a multi-step income statement . You can choose the one that best suits your needs.

Instructions:

• Open a new Excel sheet.
• Enter your company name and the period covered by the income statement (e.g., "Month Ending December 31, 2023").

Single-Step Income Statement:

Multi-Step Income Statement:

• You can add additional line items for specific revenue or expense categories relevant to your business.
• Use formulas to automatically calculate totals and subtotals.
• Format the cells for currency and percentages as needed.
• Consider using conditional formatting to highlight positive and negative values.

Steps to Prepare an Income Statement for Your Business

To prepare an income statement Excel for your business, gather all the revenue and expense data for a specific period. Calculate net sales by subtracting any returns or discounts from total sales. Next, determine the cost of goods sold, operating expenses, and other expenses to calculate the net income. Finally, present the information in a clear and organized format.

Using Excel Templates for Small Business Income Statements

Using Excel Templates for small business income statements can streamline the process of tracking and analyzing financial data. These templates provide a pre-designed layout, allowing business owners to input their income and expenses easily. With built-in formulas, calculations can be done automatically, saving time and reducing errors.

Also, Excel templates can help businesses create professional and customized income statements that can be easily shared with investors, stakeholders, or banks. This can improve transparency and credibility, leading to better decision-making and financial management.

Customizing Your Income Statement to Track Specific Business Finances

Customizing your income statement allows you to track specific business finances more effectively. By adding or removing line items, you can focus on the key metrics that matter most to your business. This tailored approach provides a clearer picture of your financial performance and helps you make more informed decisions.

Further Reading: Analyzing Profit and Loss Statements vs. Income Statements

Guidelines for Using Excel-Based Income Statement Templates

1. Customization: Make sure to customize the template to fit your specific business needs. Input your company's name, logo, and any unique categories or revenue streams.

2. Consistency: Maintain consistency in formatting and calculations to ensure accurate financial reporting. Double-check all formulas and numbers for errors before finalizing the statement.

3. Regular Updates: Update the income statement regularly with actual financial data to track performance and make informed decisions. Monitor key metrics and compare actual results to budgeted numbers.

4. Training: Train employees responsible for updating and analyzing the income statement to ensure proper template utilization and accurate financial reporting.

Maximizing the Benefits of a Free Income Statement Template for Small Businesses

Utilizing a free income statement template for small businesses can greatly benefit companies in various ways. First, it provides a structured format to input financial data and analyze key performance metrics easily. Second, it helps small business owners accurately track their revenue, expenses, and net income. Also, using a free template can save time and resources that can be allocated towards other business priorities.

Common Questions About Income Statements and Templates

Income statements are financial documents that provide a snapshot of a company's revenues and expenses during a specific period. Many people have questions about creating and using income statement templates effectively. One common question is categorizing different income and expenses on the template.

How to Calculate Net Income from an Income Statement

Calculating net income from an income statement involves subtracting all expenses, including cost of goods sold, operating expenses, taxes, and interest, from total revenues. This equation is typically found at the bottom of the income statement, showing how profitable a company is after all expenses have been accounted for.

Key Components of a Comprehensive Income Statement Template

Key components of a comprehensive income statement template include revenue, expenses, profit or loss, other comprehensive income, and earnings per share. These elements provide a comprehensive view of a company's financial performance over a specific period of time.

Using Income Statements Alongside Balance Sheets for Financial Analysis

When analyzing a company's financial health, it is essential to use both Income Statements and Balance Sheets . The Income Statement provides a snapshot of a company's performance over a specific period, while the Balance Sheet offers a snapshot of its financial position at a point in time.

By comparing the two statements, investors can understand the company's profitability, liquidity, and overall financial stability. For example, a company with a strong Income Statement but a weak Balance Sheet may struggle with cash flow or have high debt levels.

Analyzing both documents in tandem is crucial to paint a complete picture of a company's financial health. By examining trends and ratios derived from both statements, investors can make informed decisions about the company's potential for growth and long-term success.

Further Reading: Traditional Income Statement

Key Terms to Know

• Income Statement : A financial statement that shows a company's revenues and expenses over a specific period, typically monthly, quarterly, or annually. It provides insights into the profitability of a business.
• Template : A pre-designed format or layout that can be customized for various purposes. In this context, it refers to a pre-made format for creating income statements.
• Excel Design : Refers to the layout and formatting of the template, indicating that it is designed to be used with Microsoft Excel software.
• Small Business : Refers to a privately-owned corporation, partnership, or sole proprietorship that typically has fewer employees and less annual revenue than a regular-sized business or corporation.
• Revenue : The total income a business generates from its normal business activities, such as sales of goods and services.
• Expenses : The costs incurred by a business in its operations, including salaries, rent, utilities, supplies, and other expenditures necessary to run the business.
• Financial Reporting : The process of presenting financial information about a business to external parties, including investors, creditors, regulators, and tax authorities.
• Profit and Loss : Another term for the income statement, which shows the revenues, expenses, and resulting net income or net loss over a specific period.
• Financial Management : The process of planning, organizing, controlling, and monitoring the financial resources of a business to achieve its financial goals and objectives.

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How to Prepare an Income Statement

• 09 Dec 2021

When it comes to financial statements , each communicates specific information and is needed in different contexts to understand a company’s financial health .

The income statement is an essential financial document that details your company's income and expenses over a specific period. This document communicates a wealth of information to those reading it—from key executives and stakeholders to investors and employees. Being able to read an income statement is important, but knowing how to generate one is just as critical.

Here’s an overview of the information found in an income statement, along with a step-by-step look at the process of preparing one for your organization.

Access your free e-book today.

What Is an Income Statement?

An income statement is a financial report detailing a company’s income and expenses over a reporting period. It can also be referred to as a profit and loss (P&L) statement and is typically prepared quarterly or annually.

Understanding income statements is vital because they depict a company’s financial performance over a reporting period. Because the income statement details revenues and expenses, it provides a glimpse into which business activities brought in revenue and which cost the organization money—information investors can use to understand its health and executives can use to find areas for improvement.

Related: How to Read & Understand an Income Statement

An income statement typically includes the following information:

• Revenue: How much money a business took in during a reporting period
• Expenses: How much money a business spent during a reporting period
• Costs of goods sold (COGS): The total costs associated with component parts of whatever product or service a company makes and sells
• Gross profit: Revenue minus costs of goods sold
• Operating income: Gross profit minus operating expenses
• Income before taxes: Operating income minus non-operating expenses
• Net income: Income before taxes
• Earnings per share (EPS): Net income divided by the total number of outstanding shares
• Depreciation: Value lost by assets, such as inventory, equipment, and property, over time
• EBITDA: Earnings before interest, depreciation, taxes, and amortization

Related: 13 Financial Performance Measures Managers Should Monitor

Steps to Prepare an Income Statement

1. choose your reporting period.

Your reporting period is the specific timeframe the income statement covers. Choosing the correct one is critical.

Monthly, quarterly, and annual reporting periods are all common. Which reporting period is right for you depends on your goals. A monthly report, for example, details a shorter period, making it easier to apply tactical adjustments that affect the next month’s business activities. A quarterly or annual report, on the other hand, provides analysis from a higher level, which can help identify trends over the long term.

2. Calculate Total Revenue

After identifying your reporting period, calculate your business's total revenue generated in that timeframe.

If you prepare the income statement for your entire organization, this should include revenue from all lines of business. If you prepare the income statement for a particular business line or segment, you should limit revenue to products or services that fall under that umbrella.

3. Calculate the Cost of Goods Sold (COGS)

Next, calculate the total cost of goods sold for any product or service that generated revenue for your business during the reporting period. This encompasses direct and indirect costs of producing and selling products or services, including:

• Direct labor expenses
• Material expenses
• Parts or component expenses
• Distribution costs
• Any expense directly tied to the production of your product or service

4. Calculate Gross Profit

The next step is to determine gross profit for the reporting period. To calculate this, simply subtract the cost of goods sold from revenue.

5. Calculate Operating Expenses

Once you know gross profit, calculate operating expenses (OPEX).

Operating expenses are indirect costs associated with doing business. These differ from the cost of goods sold because they’re not directly associated with the process of producing or distributing products or services. Examples of expenses that fall under the OPEX category include:

• Office supplies

6. Calculate Income

To calculate total income, subtract operating expenses from gross profit. This number is essentially the pre-tax income your business generated during the reporting period. This can also be referred to as earnings before interest and taxes (EBIT).

7. Calculate Interest and Taxes

After calculating income for the reporting period, determine interest and tax charges.

Interest refers to any charges your company must pay on the debt it owes. To calculate interest charges, you must first understand how much money you owe and the interest rate being charged. Accounting software often automatically calculates interest charges for the reporting period.

Next, calculate your total tax burden for the reporting period. This includes local, state, and federal taxes, as well as any payroll taxes.

8. Calculate Net Income

The final step is to calculate net income for the reporting period. To do this, subtract interest and then taxes from your EBIT. The number remaining reflects your business’s available funds, which can be used for various purposes, such as being added to a reserve, distributed to shareholders, utilized for research and development, or to fuel business expansion.

Income Statement Format and Example

Below is an example income statement for a fictional company. As you can see at the top, the reporting period is for the year that ended on Sept. 28, 2019.

Go to the alternative version .

During the reporting period, the company made approximately $4.4 billion in total sales. It cost the business approximately $2.7 billion to achieve those sales. As a result, gross profit was about $1.6 billion.

Next, $560.4 million in selling and operating expenses and $293.7 million in general administrative expenses were subtracted. This left the company with an operating income of $765.2 million. To this, additional gains were added and losses subtracted, including $257.6 million in income tax.

At the bottom of the income statement, it’s clear the business realized a net income of $483.2 million during the reporting period.

How to Address Common Income Statement Mistakes

As you start preparing income statements, here are three factors to consider to make the process easier and ensure accuracy.

Categorization and Income Recognition

Precise financial records require proper categorization of expenses and revenues. Errors often arise from misclassifications and omissions of one-time gains. Utilize accounting software and a detailed checklist to ensure accurate entries and comprehensive income tracking.

Adjustments and Expense Management

Correctly recording prepaid expenses and depreciation is crucial. They should reflect the actual periods they apply to. This can be facilitated by advanced accounting software, which automates and minimizes errors in entries.

Data Integrity and Reconciliation

Automating data entry processes and conducting regular audits can help reduce manual data entry errors like duplication and omissions. It's important to do monthly account reconciliations to maintain data integrity and ensure financial records are accurate and follow the rules.

A Critical Skill for Business Leaders

Although the income statement is typically generated by a member of the accounting department at large organizations, knowing how to compile one is beneficial to a range of professionals.

Whether you’re an individual contributor, a member of the leadership team in a non-accounting role, or an entrepreneur who wears many hats, learning how to create an income statement can provide a deeper understanding of the financial metrics that matter to your business. It can also help improve your financial analysis capabilities .

Do you want to take your career to the next level? Consider enrolling in Financial Accounting —one of three courses comprising our Credential of Readiness (CORe) program —which can teach you the key financial topics you need to understand business performance and potential. Not sure which course is right for you? Download our free flowchart .

This post was updated on September 4, 2024. It was originally published on December 9, 2021.

Data Tables

Company b income statement.

For Year Ended September 28, 2019 (In thousands)

Go back to the article .

About the Author

Free Financial Projection and Forecasting Templates

By Andy Marker | January 3, 2024

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We’ve collected the top free financial projection and forecasting templates. These templates enable business owners, CFOs, accountants, and financial analysts to plan future growth, manage cash flow, attract investors, and make informed decisions.  On this page, you'll find many helpful, free, customizable financial projection and forecasting templates, including a  1 2-month financial projection template , a  startup financial projection template , a  3-year financial projection template , and a  small business financial forecast template , among others. You’ll also find details on the  elements in a financial projection template ,  types of financial projection and forecasting templates , and  related financial templates .

Simple Financial Projection Template

Download a Sample Simple Financial Projection Template for 

Excel | Google Sheets  

Download a Blank Simple Financial Projection Template for 

Excel | Google Sheets    

Small business owners and new entrepreneurs are the ideal users for this simple financial projection template. Just input your expected revenues and expenses. This template stands out due to its ease of use and focus on basic, straightforward financial planning, making it perfect for small-scale or early-stage businesses. Available with or without sample text, this tool offers clear financial oversight, better budget management, and informed decision-making regarding future business growth. 

Looking for help with your business plan? Check out these  free financial templates for a business plan to streamline the process of organizing your business's financial information and presenting it effectively to stakeholders.

Financial Forecast Template

Download a Sample Financial Forecast Template for 

Download a Blank Financial Forecast Template for 

This template is perfect for businesses that require a detailed and all-encompassing forecast. Users can input various financial data, such as projected revenues, costs, and market trends, to generate a complete financial outlook. Available with or without example text, this template gives you a deeper understanding of your business's financial trajectory, aiding in strategic decision-making and long-term financial stability. 

These  free cash-flow forecast templates help you predict your business’s future cash inflows and outflows, allowing you to manage liquidity and optimize financial planning.

12-Month Financial Projection Template

Download a Sample 12-Month Financial Projection Template for 

Download a Blank 12-Month Financial Projection Template for 

Use this 12-month financial projection template for better cash-flow management, more accurate budgeting, and enhanced readiness for short-term financial challenges and opportunities. Input estimated monthly revenues and expenses, tracking financial performance over the course of a year. Available with or without sample text, this template is ideal for business owners who need to focus on short-term financial planning. This tool allows you to respond quickly to market shifts and plan effectively for the business's crucial first year. 

Download  free sales forecasting templates to help your business predict future sales, enabling better inventory management, resource planning, and decision-making.

Startup Financial Projection Template

Download a Sample Startup Financial Projection Template for 

Download a Blank Startup Financial Projection Template for 

This dynamic startup financial projection template is ideal for startup founders and entrepreneurs, as it's designed specifically for the unique needs of startups. Available with or without example text, this template focuses on clearly outlining a startup's initial financial trajectory, an essential component for attracting investors. Users can input projected revenues, startup costs, and funding sources to create a comprehensive financial forecast.

3-Year Financial Projection Template

Download a Sample 3-Year Financial Projection Template for 

Download a Blank 3-Year Financial Projection Template for 

This three-year financial projection template is particularly useful for business strategists and financial planners who are looking for a medium-term financial planning tool. Input data such as projected revenues, expenses, and growth rates for the next three years. Available with or without sample text, this template lets you anticipate financial challenges and opportunities in the medium term, aiding in strategic decision-making and ensuring sustained business growth.

5-Year Financial Forecasting Template

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Download a Blank 5-Year Financial Forecasting Template for 

CFOs and long-term business planners can use this five-year financial forecasting template to get a clear, long-range financial vision. Available with or without example text, this template allows you to plan strategically and invest wisely, preparing your business for future market developments and opportunities. This unique tool offers an extensive outlook for your business’s financial strategy. Simply input detailed financial data spanning five years, including revenue projections, investment plans, and expected market growth. Visually engaging bar charts of key metrics help turn data into engaging narratives.

Small Business Financial Forecast Template

Download a Sample Small Business Financial Forecast Template for 

Download a Blank Small Business Financial Forecast Template for 

Excel | Google Sheets 

The small business financial forecast template is tailored specifically for the scale and specific requirements of small enterprises. Business owners and financial managers can simply input data such as projected sales or expenses. Available with or without sample text, this tool offers the ability to do the following: envision straightforward financial planning; anticipate future financial needs and challenges; make informed decisions; and steer the business toward steady growth.

Elements in a Financial Projection Template

The elements in a financial projection template include future sales, costs, profits, and cash flow. This template illustrates expected receivables, payables, and break-even dates. This tool helps you plan for your business's financial future and growth.   

Here are the standard elements in a financial projection template:   

• Revenue Projection: This estimates future income from various sources over a specific period.
• Expense Forecast: This predicts future costs, including both fixed and variable expenses.
• Profit and Loss Forecast:  This projects the profit or loss by subtracting projected expenses from projected revenues.
• Cash-Flow Projection: This assesses the inflows and outflows of cash, indicating liquidity over time.
• Balance Sheet Projection: This predicts the future financial position, showing assets, liabilities, and equity.
• Break-Even Analysis: This calculates the point at which total revenues equal total costs.
• Capital Expenditure Forecast: This estimates future spending on fixed assets such as equipment or property.
• Debt Repayment Plan: This outlines the schedule for paying back any borrowed funds.
• Sales Forecast:  This predicts future sales volume, often broken down by product or service.
• Gross Margin Analysis:  This looks at the difference between revenue and cost of goods sold.

Types of Financial Projection and Forecasting Templates

There are many types of financial projection and forecasting templates: basic templates for small businesses; detailed ones for big companies; special ones for startup businesses; and others. There are also sales forecasts, cash-flow estimates, and profit and loss projections. 

In addition, financial projection and forecasting templates include long-term planning templates, break-even analyses, budget forecasts, and templates made for specific industries such as retail or manufacturing. 

Each template serves different financial planning needs. Determine which one best suits your requirements based on the scale of your business, the complexity of its financial structure, and the specific department that you want to analyze.

Here's a list of the top types of financial projection and forecasting templates:  

• Basic Financial Projection Template: Ideal for small businesses or startups, this template provides a straightforward approach to forecasting revenue, expenses, and cash flow.
• Detailed Financial Projection Template: Best for larger businesses or those with complex financial structures, this template offers in-depth projections, including balance sheets, income statements, and cash-flow statements.
• Startup Financial Projection Template: Tailored for startups, this template focuses on funding requirements and early-stage revenue forecasts, both crucial for attracting investors and planning initial operations. 
• Sales Forecasting Template:  Used by sales and marketing teams to predict future sales, this template helps you set targets and plan marketing strategies. 
• Cash-Flow Forecast Template: Essential for financial managers who need to monitor the liquidity of the business, this template projects cash inflows and outflows over a period. 
• Profit and Loss Forecast Template (P&L):  Useful for business owners and financial officers who need to anticipate profit margins, this template enables you to forecast revenues and expenses.  
• Three-Year / Five-Year Financial Projection Template: Suitable for long-term business planning, these templates provide a broader view of your company’s financial future, improving your development strategy and investor presentations. 
• Break-Even Analysis Template:  Used by business strategists and financial analysts, this template helps you determine when your business will become profitable. 
• Budget Forecasting Template:  Designed for budget managers, this template uses historical financial data to help you plan your future spending. 
• Sector-Specific Financial Projection Template:  Designed for specific industries (such as retail or manufacturing), these templates take into account industry-specific factors and benchmarks.

Related Financial Templates

Check out this list of free financial templates related to financial projections and forecasting. You'll find templates for budgeting, tracking profits and losses, planning your finances, and more. These tools help keep your company’s money matters organized and clear.

Free Project Budget Templates

Use one of these  project budget templates to maintain control over project finances, ensuring costs stay aligned with the allocated budget and improving overall financial management.

Free Monthly Budget Templates

Use one of these  monthly budget templates to effectively track and manage your business’s income and expenses, helping you plan financially and save money.

Free Expense Report Templates

Use one of these  expense report templates to systematically track and document all business-related expenditures, ensuring accurate reimbursement and efficient financial record-keeping.

Free Balance Sheet Templates

Use one of these  balance sheet templates to summarize your company's financial position at a given time.

Free Cash-Flow Forecast Templates

Use one of these  cash-flow forecast templates to predict future cash inflows and outflows, helping you manage liquidity and make informed financial decisions.

Free Cash-Flow Statement Templates

Use one of these  cash-flow statement templates to track the movement of cash in and out of your business, so you can assess your company’s level of liquidity and financial stability.

Free Discounted Cash-Flow (DCF) Templates

Use one of these  discounted cash-flow (DCF) templates to evaluate the profitability of investments or projects by calculating their present value based on future cash flows.

Free Financial Dashboard Templates

Use one of these  financial dashboard templates to get an at-a-glance view of key financial metrics, so you can make decisions quickly and manage finances effectively.

Related Customer Stories

Free financial planning templates.

Use one of these  financial planning templates to strategically organize and forecast future finances, helping you set realistic financial goals and ensure long-term business growth.

Free Profit and Loss (P&L) Templates

Use one of these  profit and loss (P&L) templates to systematically track income and expenses, giving you a clear picture of your company's profitability over a specific period.

Free Billing and Invoice Templates

Use one of these  billing and invoice templates to streamline the invoicing process and ensure that you bill clients accurately and professionally for services or products.

Plan and Manage Your Company’s Financial Future with Financial Projection and Forecasting Templates from Smartsheet

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