An income statement, or profit and loss statement, reports a business's revenue and expenses over a period, ending in net profit or loss.
The income statement covers a period, a month, quarter or year, and works top to bottom: revenue, less cost of goods sold to get gross margin, less operating expenses to get operating profit, less interest and tax to reach net income. It answers the fundamental question of whether the business made money.
Along with the balance sheet, the income statement feeds the GIFI schedule on the T2 return, so its figures flow directly into your corporate tax. Because it shows performance over time, comparing income statements across periods reveals trends in sales, costs and profitability.
A company reports $500,000 revenue, $300,000 cost of goods sold, $150,000 operating expenses and $10,000 tax. Its income statement shows $40,000 net income for the year.
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