The income statement is the most popular financial statement – this is your summary of income and expenses for a given period of time.

And while that’s the simple take on it, it provides a lot more insight than just net income or loss. The discussion of the income statement could span a lengthy discussion, but I’ll just cover a few below.

Income is also often referred to as ʀᴇᴠᴇɴᴜᴇs. If you have it setup optimally, good accounting software can also show you what customers are providing a majority of your revenue, where they’re from, what business segments generate the most revenue, and what classes of income you have.

ᴄᴏsᴛ ᴏꜰ ɢᴏᴏᴅs sᴏʟᴅ (ᴄᴏɢs) are expenses that are directly, or indirectly, attributed to the creation of revenues. These are often things such as contract labor or payroll, products, and supplies that you have to purchase or else you couldn’t be in business. COGS can also be referred to as the ‘cost of revenues’ which I like better, because it reinforces the concept that it takes money to make money.

Next, you have your ᴇxᴘᴇɴsᴇs, which we’re most familiar with. Great insight can be achieved if you can break these apart as either fixed expenses or variable. Fixed are those that you pay regardless of business activity. Variable will change depending on various levels of activity.

While I could dive into a whole other realm with all the great insight the income statement provides, this is a great starting point for not just looking at your profit and loss, but making use of it for meaningful insight into strategic action taking.