Income statement is the financial statement which sums up all incomes & expenditures. This financial template is prepared to obtain ultimate result of the business operation, which can be profit or loss.
Advantages of Income Statement
- It provides with the revenue data which generally adheres to the Accounting standards issued by relevant authority.
- It provides basis for tax calculation, as it is mainly prepared for calculation of financial results , which may either be profit or loss
- This statement is basic evaluation tool for the investors, who can assess viability & growth of the company before investing into them.
- This also provides as a basis of preliminary financial analysis of the company as it also provides net earnings as well as EPS ( Earnings Per Share)
Disadvantages of Income Statement
- This statement is prepared generally on accrual basis, which may be confusing & misleading. This is because there will be lot of unpaid expenses already debited & also there would be lot of income which is not realized but only accrued.
- Income statement simply gives the financial framework of the company. However there are other non financial factors which are equally vital for the business like environmental cost & benefit analysis (CBA) etc.
