Accounting basics: income statement analysis

If you use QuickBooks, you don’t need to spend hours working on your company’s accounts. QuickBooks accounting software allows businesses to construct their own financial statements without needing to hire an internal accountant or an external accounting firm. We provide the ideal software for small to medium-sized businesses to create efficient income statements and other financial reports.

An income statement is a company’s financial statement that identifies how money is received and spent in a company. This is the report of a company’s earnings and expenses that is of great interest to investors and business partners. Investors often make their decisions based on income statement analysis. This makes this statement one of the most important that your business will produce and should be included as the front page of your company’s annual report.

In order to make a proper income statement analysis, the following need to appear in an income statement:

  1. revenue
  2. finance costs
  3. share of profits and losses (utilising the equity method)
  4. tax expenses
  5. post-tax profit on operations that have been discontinued
  6. an amount revealing profit or loss
  7. minority interest
  8. net profit or loss

Don’t struggle over your company’s books; use QuickBooks accounting software to manage your accounts effectively. QuickBooks offers packages such as the SimpleStart, Pro and Premier programs, each of which offers slightly different functionality. For a positive income statement analysis, use our accounting software to create professional and effective financial statements. Because accounting software takes the stress out of income statement analysis, you can focus on ensuring that all human error is removed from the process.

What an income statement analysis can reveal about your company

Basically, an income statement reveals the amount of money that your company has made (revenue), the amount that has been spent (expenses) and the difference between the two (profit). These amounts are calculated for a certain time period – often once every three months or at the end of the year. An income statement analysis is the most important report for investors because it reveals the health of your business and gives them a good indication whether the company is being managed successfully.

It reveals many important insights into a company:

  • it uncovers how effectively management has been controlling the company’s expenses
  • it highlights whether the company has been paying taxes or not
  • it illustrates the total amount of interest accrued with regards to income and expenses
  • the information can also be used to calculate financial ratios; this informs investors about the rate of return earned by the business on the shareholders’ retained earnings and assets
  • it provides a comparison between your company’s profits to its competitors, simply by examining the various profit margins. These include examining the gross profit margin, operating profit margin and net profit margin.

QuickBooks accounting software is easy to use and can help your company create professional financial statements. Browse our packages to find one that will suit your company best, or contact us for more information on our packages.