One of the most important financial reports involved in bookkeeping services is an income statement. This document offers vital information to both internal and external parties, making it a critical aspect of running a company. If you're new to the reporting process, here's a closer look at what you need to know.

What Is an Income Statement?

As the name suggests, income statements are designed to identify a company's profits. You achieve this goal by subtracting your expenses from your revenue. While these details are available in separate financial documents, the income statement offers a compact overview of the company's current status, while also providing insight into trends. Typically, the figures are reported quarterly and yearly for external use and monthly for internal use.

Why Is It Important?

The information provided in income statements is valuable in a variety of situations. Internally, the details are analyzed to help guide financial decisions in terms of spending and investments. Externally, the figures can be used by lenders to determine your eligibility for a loan, and they can also provide a status report to investors. Additionally, the data is useful for tax preparation and planning because it offers insight into the business' earnings and losses. 

What Are the Components?

As with the majority of bookkeeping services, income statements are customized for each business. However, three main components are universal: revenue, expenses, and profit. Each section of the report can be further broken down into subcategories that offer important details, such as the type of expense or product versus service sales. For profits, the total is shown before taxes, but it's also common to display the post-tax amount.

Stay on top of your business' finances by turning to ZP Tax, Inc. in Silver Spring, MD. From bookkeeping services to tax preparation, these accountants provide valuable financial services to businesses across the Washington, D.C. area. Learn more about their commercial and corporate specialties online, and request tax help today by calling (301) 587-4829.