IncomeStatementIncomeStatementDrJenniferMaoWhileabalancesheetisastock-basedstaticstatementthatpresentsacompany'sfinancialpositionatapointintime，anincomestatementisaflow-baseddynamicstatementthatdescribesacompany'soperatingperformanceoveraperiodoftime.Theperiodcoveredbyanincomestatementmustbeclearlyspecified.Thephrase"IncomeStatement(1)of30June1997"ismeaninglessunlessitisintendedtoshowtherevenuesandexpensesforthesingleday30June1997.Historically，theincomestatementusedtobeasupportingstatementtothebalancesheet.Withouttheincomestatement，wewouldrecordrevenueasanincrease，andexpenseasadecrease，oftheequityaccountRetainedEarnings.Suchtransactionsarenumerous.Tosimplifythebookkeeping，aswellastoprovidemoreusefulinformation，theincomestatementwasborn.Dependingonhowrevenuesandexpensesarepresented，thereareroughlytwoformatsoftheincomestatement，thetraditionalmulti-stepformatandtherelativelynewtwo-stepformat.Theformerhasafewsteps:Sales-CosofGoodsSold=GrossProfit;GrossProfit-OperatingExpenses=OperatingIncome;OperatingIncome±Non-OperatingItems=EBT(EarningsBeforeTax);EBT-IncomeTax=NetIncome.Ofcoursewhetheranitemisoperatingornotdependsonthenatureofthebusiness.Forinstance，whileInterestExpensemaybeanon-operatingexpenseformanycompanies，itisthemostimportantoperatingexpenseforbanks.Whenacompanyhaslossesratherthanearnings，itdoesnothavetopayincometax.Itmayalsobeallowedtocarrythelossbackwardand/orforward，dependingonthetaxenvironmentthecompanyisin.Differentusersoffinancialstatementsoftenhavedifferentneeds.Themulti-stepformatoftheincomestatementisunlikelytosuitallneeds.SomeAmericancompaniestooktheleadtousethetwo-stepformat.Inthisformat，theincomestatementcontainsbasicallytwoparts.Thefirstpartlistsallsourcesofrevenueswhilethesecondlistsallkindsofexpenses.Areadercanpreparetheincomestatementinanyformtosuithispurpose.Itmustbepointedoutthatthenetincomeshownintheincomestatementisanaccountingprofit，notcashflow.Inthecomputationofaccountingprofit，cashreceiptsfromsellingfarecardsarenotrecognisedasrevenue.Rat