Application of Financial Statement: Income Statement

Abstract

In this paper I will be discussing the importance of an Income Statement and how a person can apply it to their daily life. It is a very beneficial financial tool to keep them organized and on track. Also included is how a business manager may benefit from understanding how to efficiently execute an income statement and how it would keep them profitable while allowing them to recognize where they might have went wrong. Lastly I will explain how I plan on utilizing an income statement in my life as well as any management job I am to have in the future.

Income Statements are used by families that may not even know what an Income Statement is. It is basically an itemized list of income and expenditures to keep ones finances organized and accounted for. It is not much different from balancing a checkbook. I believe this should come as second nature to every household in order for them to properly manage their finances and keep track of their expenditures. It can truly keep a family from becoming financially lost and unstable but rather keep them self-sufficient and living within their means. An Income Statement will keep from excessive and unnecessary spending and will contribute to a more conscious saving plan.

Businesses use Income Statement's as a reflection of the management's performance. This can be seen in the profitability, or lack thereof, of a business or organization over a certain period of time. The revenue and expenses are itemized from past to present profit or loss and indicates possibilities of reversing the results and is key to what should not be done in the future. This could be beneficial to a manager to comprehend because it directly affects them and is based off of how they are conducting business. I currently make myself an Income Statement and feel more assured with my spending because I account for every dollar I spend. There is a sense of relief to be had when correctly utilizing an Income Statement. If ever I become a...