the Condensed Income Statement

When preparing an income statement, first determine the period that the statement will cover, such as a month, quarter or year. Often, income statements include both the current period and a comparison with the corresponding period in the prior year.

Montana begins mining on May 1, 2017, and mines and sells 166,200 tons of ore during the remaining eight months of 2017. Prepare the December 31, 2017, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion.

Income Statement Explained

Its detailed purchases and changes in inventory will be presented as one amount with the description Cost of Goods Sold. Perhaps thousands of operating expenses will be presented as one amount with the description Selling, General and Administrative, or SG&A. A condensed income statement is typically issued to external parties, who are less interested in the precise sources of a company’s revenues or what expenses it incurs, and more concerned with its overall performance. Thus, bankers and investors may be interested in receiving a condensed income statement, while a company manager would likely want to see more detail. They examine a company’s historical performance, as reported on income statements, to determine its investment value and creditworthiness and to help predict its future success. While past results don’t guarantee future success, they are the most common way of gauging the economic value of a business and the likelihood of repayment of debt.

It shows the revenue and profit generated from operations as well as other gains and losses. Investors and other stakeholders examine income statements to see how profitably leaders run a business. The term profit and loss (P&L) statement refers to a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a quarter or financial year. These records provide information about a company’s ability or inability to generate profit by increasing revenue, reducing costs, or both.

Statement of Comprehensive Income

Condensed financial statements are a highly aggregated version of the financial statements, where most of the line items are summarized into just a few lines. This approach is used to simplify the presentation of information, sometimes into a single page for all three of the financial statements. The footnotes that usually accompany a complete set of financial statements may not be presented when a condensed format is used. The components as income statement and statement of comprehensive income are financial reports.

The non-operating activities section lists other income and expenses, such as interest payments on loans and realized gains or losses on investments. 5If the auditor’s opinion on the complete financial statements was other than unqualified, the report should describe the nature of, and the reasons for, the qualification. The auditor should also consider the effect that any modification https://personal-accounting.org/ of the report on the complete financial statements might have on the report on the condensed financial statements or selected financial data. However, no reference to the inconsistency is necessary if a change in accounting referred to in the auditor’s report on the complete financial statements does not affect the comparability of the information being presented.

What are Condensed Financial Statements?

In addition, income statements reflect only business activities that can be reliably quantified. For example, income statements don’t reflect missed business opportunities or positive or negative societal impacts. Expenses are typically broken down into operating expenses and nonoperating expenses, and may be further subdivided into categories. Regardless of how information is presented, the same underlying data and accounting methods are used to create the statement.

Two common formats are the single-step income statement and the multiple-step income statement. Income statements can be reported in several different formats, with varying levels of detail. A simple, summarized financial statement helps readers quickly get an overview of the company’s results; a statement with more detail enables readers to find specific information that is important to them. Income statements are essential tools for communicating financial condensed income statement information to people outside the business. A company can present its income statement as evidence of its financial performance in order to obtain loans and investments, for example. Income statements present a great deal of information about a company’s activities during a specific period. It may be tempting to focus on “the bottom line”—the amount of net income—but there’s useful information throughout the entire income statement, from top to bottom.

Components of an Income Statement.

Common examples of gains include profits from disposal of assets, selling investments and proceeds from lawsuits. Depending on the nature of the company’s business and the type of income statement used, there may be several lines listing different sources of revenue, such as revenue from primary and secondary activities, or revenue by business unit or geography. Selected Consolidated Financial Data and “Capitalization” fairly present the information set forth therein on a basis consistent with that of the audited financial statements contained in the Registration Statement. Although the income statement is a go-to document for assessing the financial health of a company, it falls short in a few aspects. The income statement encompasses both the current revenues resulting from sales and the accounts receivables, which the firm is yet to be paid.

• While past results don’t guarantee future success, they are the most common way of gauging the economic value of a business and the likelihood of repayment of debt.
• Aggregate the rest of the operating expenses, such as selling, marketing, administrative, travel, rent and other items, for inclusion in the operating expenses section of the income statement.
• Financial statement analysis is the process of analyzing a company’s financial statements for decision-making purposes.
• The items on a multi-step income statement are divided into sections that separate operating revenue and expenses from the results of non-operating activities, taxes and extraordinary items.
• Of these three, the income statement is often considered to be the most important tool for communicating and measuring the success of the business.
• We report these businesses separately as discontinued operations in the Condensed Consolidated Financial Statements.

In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 20X0, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. To do so might lead users to assume, erroneously, that the condensed financial statements include all the disclosures necessary for complete financial statements. For the same reason, it is desirable that the condensed financial statements be so marked.

If S-X 5-03 indicates the placement of the detailed information is optional, the caption is in regular font. Additionally, US GAAP requires certain disclosures, which can generally be presented in the footnotes or on the face of the income statement. But the definition of sales revenue is the revenue that comes from sales of product and services, while revenue includes income generated from things not directly related to the core business, such as income generated from interest on savings or cash paid out by dividends.

• Whereas, other comprehensive income consists of all unrealized gains and losses on assets that are not reflected in the income statement.
• Financial modelling can help companies forecast future performance or analyze the impact of anticipated changes to the business, such as making an acquisition or discontinuing a product line.
• Comment on the results from parts 3 through 8 in relation to the fixed-cost strategies of the two companies and the ratio values you computed in parts 1 and 2.
• A company’s income statement is often considered the most important tool for communicating financial information to people outside the business.
• 5If the auditor’s opinion on the complete financial statements was other than unqualified, the report should describe the nature of, and the reasons for, the qualification.
• The statement is based on the accrual system of accounting meaning that all the expenses that need to be incurred during the year would be recorded although the cash flows are not necessary.

Large organizations may have an entire department dedicated to financial planning and analysis that constantly scrutinizes the results of operations. Identify and compile the revenue accounts for inclusion in the revenue section of the income statement. These include sales accounts as well as any estimates for allowances, like bad debt or returns.