As the title suggests, the income statements are basically the financial statements of the registered companies. The companies that are within the legal framework of doing business in a territory or a region has to compulsorily release income statements per month, quarterly, half-yearly and annually.
There are different names by which the income statements are known for. The type of organizations or companies and the management decisions are main factors behind these varieties of names. Those are –
- Statement of Operations
- Profit and Loss Statement
- Earnings Statement
- Statement of Financial Performance
Few major advantageous points of the income statements:
- The management of the organization get to know the true picture of the financial status of its company. On basis of this they design the relevant policies and restructure the mobilization of funds across various functioning segments of the company. It helps in optimized implementation of the policies.
- The investors of the organization and the potential creditors get clear ideas about the financial health of the company. Accordingly, they plan to moderate their decisions in regards to funding the company and help it to get stability in both short and long terms.
There are many firms that rigorously hire chartered accountants and financial analysts to prepare the income statements in a flawless manner. The hired experts work on studying the intricate details of the income and the expenses of the concerned firm and develop the income statements of the stipulated time-frame. A very important point to be taken into consideration at this context is that any income statement needs to be abided by the regulatory norms of the federal government.
Another crucial point to be taken into account is it does not matter who own the business entity – it may be the government, or private players or a joint partnership; but the preparation of an extensive financial statement is compulsory, irrespective of the affiliation that the particular business entity has.