The aim of the income statement is to show how much profit has been generated by the business in a financial year.
These are published on companies house.
There are 3 key sections of an income statement:
- Gross profit
- Additional Income
- Minus Expenses
The first two sections are similar to the sole trader layout.
The expenses section is not listed in the same way as they are in the sole trader income statement. They are instead grouped into categories;
- Operating expenses
After subtracting the expenses from the gross profit. We will get the profit from operations
We then minus finance costs (any interest) from the profit from operations to get the profit before tax.
We then minus the tax to finally get the profit after tax.