Income statement – definition, type, function, and stage of making
In running a business, you may focus on how to increase product sales. However, don’t forget you also have to pay attention to stock items. Because, so you know which products are in demand and still stagnant. Therefore, so that everything is detailed, you need to make a profit or loss.
If you hear the word income statement, usually stigma goes to the company. That is true. Because not many MSMEs make these reports. The report is important for business development. Because the report is used to monitor the outflow of funds.
However, do you know about the income statement? What are the types? Then what functions and how to make it? Below, you will get the answer in full and detail.
Profit and loss Definition
The income statement is a report made by the Financial Admin in the company. The report contains inflows and exits of company funds. So you can know which company advantages. Also able to see which company burden.
Usually, the report is made at the end of each month. In addition, there must also be reports at the end of the year. Because this is an evaluation material in the future. Some programs need to be repaired
If writing the report in detail and details, in the following month or year, the company is better prepared to innovate. It is not impossible to sell more products or services to increase.
Type of income statement
Single Step Income Statement
This report is suitable for companies with the stub category. In addition, it is also suitable for use in MSMEs. Because this report is quite simple.
The single-step referred to here is that there is only one category of expenditure and one income category. So, reports like this are less suitable if large companies are used. Because it is unable to calculate the ratio of profitability and efficiency.
Multi-Step Income Statement
If the Single Step income statement is not suitable for large companies, reports with multi-step models can be a good example. Each account charge is written in detail based on the type and category. For example, there are operational costs and non-operational costs. In addition, there is also a separation of the main expenses both in terms of sales and purchases.
Income statement function
Each income statement made both at the end of the month or end of the year must get approval from the company. So, there are certain functions if the report is on schedule and calculating periodically.
1. As an evaluation material
Every business in the company must experience financial transactions. If it can’t a month, it means a year. Well, from there it will look at how much profit or loss is obtained by the company.
If the report is completely recorded and detail, you can find out how the transaction origin. So, this is a good evaluation tool.
2. Knowing business developments
Reports of profit and loss are benchmarks from a company. If the profit increases from month to month, the company can be said to be good. Especially if it’s not just a profit but also a loyal customer.
Therefore, this is the importance of the report. If there is a loss, you can analyze the report.
3. Determine policy steps
Aside from being an evaluation material, the report is also used as a policy determinant. Of course, you must have seen and checked how the results of the report. Then, you will analyze it to determine the next step.
If you need a new product, try the innovation. If you need a wider target market, do social media marketing to reach them.
Stage making income statement
There are 5 stages to make the report. Simak carefully and carefully.
- Make a transaction journal: There are 3 things, namely income, burden, and derivatives.
- Take notes in the ledger: After you arrange, then move it to the ledger to be neater.
- Record income and workload: You can check from the columns that you have arranged.
- Check the balance sheet column and see the load: Profit and loss are the difference between total income and total load.
- Check revenue and expenses: If income is greater than the load, there is a profit. If the opposite, there is a loss.
That is the meaning, type, function, and stage of making income statements that you need to know. When you have understood the importance of profit and loss, you are ready to run a business. For your business to grow and increase the number of customers you don’t forget to advertise through the Froggy Ads service, you can start by advertising your product, so that later you can improve visitors in your online business portal. FROGGY ADS is an online advertising service that can help you control all your product campaigns. Helps you target the targeting target you want and give you many choices to market your product.