Financial Statements for Corporations

Financial statements are reports that summarize the financial condition of an organization on a specific date. Three principal types of financial statements are: the Income Statement, which tracks the organization’s income over time; the Balance Sheet, which is used to view the organization’s net worth at a particular time; and the Cash Flow Statement, which reports how much cash the organization has on hand.

Income statement. The Income Statement figures net income, or the bottom line. Net income is calculated by adding all business revenue, and then subtracting all costs and expenses of operating the business. Net income is also referred to as net profit. An Income Statement is an extremely useful tool for a small corporation, and can be used for projections, tax purposes, to evaluate your corporation, and to attract investors. An excellent way to understand your corporation’s financial condition is to compare the numbers on your Income Statement with the budget for the same time period.

Although an Income Statement can be simple and include only revenues, expenses, and net income, more detail can be very helpful, and ultimately serve as a chart of accounts for the corporation.

Key components in an Income Statement include:

Gross sales (or gross revenues);

Returns and allowances;

Costs of goods sold;

Sales-related, general, and administrative expenses;

Income taxes;

Net income (or net profit).