An income statement, again called profit and loss statement, basically adds an itemized list of all your revenues and subtracts an itemized list of all your expenses to come up with a profit or loss for the period. Having an updated Income Statement each period helps:
• Track revenues and expenses so that you can determine the operating performance of your business.
• Determine what areas of your business are over-budget or under-budget.
• Identify specific items that are causing unexpected expenditures. Like phone, fax, mail, or supply expenses.
• Track dramatic increases in product returns or cost of goods sold as a percentage of sales.
• Determine your income tax liability.