The Income Statement, also referred to as the Profit and Loss (P&L) account, reflects the earnings of a company.
Earnings are the net outcome of a company’s operations and are the amount on which corporate tax is due, also referred to as Profit (which are reflected as six different profit levels within the Income Statement).
Revenue (also known as income, sales or billings) is the income that a business generate selling its core means of business, its product. Revenue is also referred to as the ‘Top Line’ due to its position in the Income Statement.
Expenses are all the cost an organisation incurs in conducting it’s daily operations ie salaries, rent, cost of stock/product, etc.
The Income Statement are divided into six profit areas, each showing a specific level of profit namely:
- Gross Profit (GP)
- Net Contribution
- Operating Profit (OP)
- Profit Before Tax (PBT)
- Net Profit / Profit After Tax (PAT)
- Retained Profit (RP)
In the Book “What the Numbers Mean“, Renier provides a detailed overview of each of the profit areas within the Income Statement. He also covers concepts like “Top Line” and “Bottom Line” as well as key Finacial performance KPIs like Gross Margin, Net Contribution and Operating Profit and how this P&L information can be used in daily operational management to improve efficiency and profitability.
You can obtain a copy of the book “What the Numbers Mean” from LeanPub here…