Accounting All-in-One For Dummies, with Online Practice, 2nd Edition

Chapter 2

Preparing an Income Statement and Considering Profit

IN THIS CHAPTER

Getting a grip on what profit is and isn’t

Designing the income statement and deciding what to disclose

Recognizing how profit affects a business and its financial condition

Handling unusual gains and losses in the income statement

Correcting misconceptions about profit

An income statement shows in black and white how much money a business earned and spent over any given period along with a bottom-line figure — net profit or loss. As an accountant, you create income statements for your company and other users, including investors. Business owners and managers use income statements to determine the overall financial condition of their business and to make informed decisions. Investors and lenders may also refer to a company’s income statements when deciding whether to buy or sell shares in the company or loan the company money.

This chapter begins with the components that make up the income statement. ...