How to Read and Interpret Financial Statements

5

The Income Statement

Learning Objectives By the end of this chapter, you should be able to: • Identify income and expense accounts. • Identify the various income statement formats. • Prepare the single-step income statement. • List the five types of revenue and expense adjustments.

INTRODUCTION

The income statement serves three key functions. First, it is a summary of the revenues and expenses of an entity for a specified period of time. Second, it summarizes the company’s operational activity. Finally, the income statement account balances reflect the cumulative activity in the revenue and expense accounts for the period being reported. ...