The Income Statement, also known as Income or State (or account) of Income, is a financial statement showing the income and expenditure has been for a company over its fiscal year.

Examples of income are sales, dividends and investment income, etc.

Examples of expenditures are consumption goods, personal expenses, financial expenses, depreciation, taxes, etc.

The difference between revenue and expenditure is known as a benefit (when revenues are greater than expenses) or loss (when expenses exceed income).

Unlike Cash Flow, Income Statement shows revenue and expenses when they occur, regardless of when they become effective charges or payments, for example, record a sale or purchase at the time produced, although it is charged or paid months later.

The importance of the Statement is that it allows us to analyze the financial situation of the company, for example, to compare different scenarios where production has increased or decreased, or, in the case of a projected income statement (also known as Operating Budget), by showing the projections of future revenue and expenses that the company will allow us to know the future profitability and therefore viability.

Let’s look at a simple example of how to prepare a projected income statement:

A manufacturing company has the following data:

* Sales projections: January: 85000, February: 88,000 March: 90,000, April: 92 000.
* Production cost projections: January: 47000, February: 51,000 March: 50,000, April: 52000.
* The selling and administrative expenses are 20% of projected sales.
* Depreciation is 10% of production costs.
* Projections of interest on a loan obtained: January: 900 February: 750 March: 600 April: 450.
* The tax is 20% of the income available.

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