The income statement is another name for the profit and loss statement. It summarises revenue, expenses and profit or loss over a specific period.
The income statement and profit and loss statement (P&L) are the same financial report - the terms are used interchangeably. This statement summarises your business's financial performance over a period by listing all revenue earned and all expenses incurred, arriving at a net profit or loss. The standard format presents: Revenue at the top, minus Cost of Goods Sold to arrive at Gross Profit, minus Operating Expenses to arrive at Operating Profit, minus Interest and Tax to arrive at Net Profit. The income statement is used by business owners to monitor profitability, by lenders to assess repayment capacity, by investors to evaluate performance and by tax authorities to verify reported income. It should be read alongside the balance sheet and cash flow statement for a complete financial picture. SortBooks ensures your income statement is always accurate and current by categorising every transaction to the correct revenue or expense account in real-time through Xero.
SortBooks helps with the bookkeeping behind income statement by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing income statement by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
The P&L (also called the income statement) shows your business revenue, expenses and resulting profit or loss over a specific period.
Revenue (also called sales, income or turnover) is the total amount earned from selling goods or services before any expenses are deducted. It is the top line of the P&L.
Net profit (also called net income or the bottom line) is your total revenue minus all expenses, including COGS, operating expenses, interest and tax. It is the final profit figure.
Gross profit is your revenue minus the cost of goods sold (COGS). It shows how much money remains from sales after covering direct production or purchasing costs.
Financial statements are formal reports that summarise your business's financial position and performance. The three core statements are the profit and loss, balance sheet and cash flow statement.
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