Income statement

The income of a business is the sum of those things that increase the value of the assets without any corresponding increase in the liabilities or any new investment by the owners of the business. Examples include revenue from the sale of goods, equipment or services supplied, rent or interest received and capital gains.

The expenses of a business are those things that reduce the value of the assets without any corresponding reduction in the liabilities or any capital drawings by the owners. Examples include the cost of stock and raw materials, rent or interest paid, electricity bills, telephone, wages, taxes, dividends, depreciation and donations to charity.

The income and expenses of a business are financial measurements that relate to a specified period of time rather than a specific point in time. The financial statement that is used to present this information is known as the income statement. The income statement is a statement of the income and expenses of a business as they occur during a specific period.

The income statement is commonly divided into two sections in a similar fashion to the balance sheet. One section shows the total income and the other section shows the total expenses. Like the balance sheet each section will be broken down into more or less detail depending on its intended use. However unlike the balance sheet the totals of each of the two sections are unlikely to be the same. The difference will usually be shown as a separate item at the bottom of the income statement and if the total income exceeds the total expenses it will be given a title such as retained earnings, net profit or excess of income over expenditure. If the total expenses exceed the total income it will instead be called something like retained loss, net loss or excess of expenditure over income.

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Vocabulary to the text

income – доход, поступления; заработок

expenses – расходы, издержки

drawings – изъятия (выплаты из чистой прибыли индивидуальному предпринимателю или участнику партнерства, аналогичные дивидендам в акционерной компании)

depreciation – амортизация

income statement – отчет о доходах

totals – итоги

retained earnings – нераспределенная прибыль (чистая прибыль компании, не распределенная среди акционеров, а направленная в резервы или на другие цели )

net profit – чистая прибыль

net loss – чистый убыток