Frequently Asked Questions(FAQ)

What are the most important figures in an income statement?

Every income statement starts with Gains and Revenues at the top, followed by Expenses and Losses. At the end of the statement is the company’s Net Income, calculated by subtracting Expenses and Losses from Gains and Revenues.

Can you use a template to create an income statement?

Yes, you can absolutely use a template to create an income statement. Using specialized accounting software would make the process even easier.

How do I know if my income statement is correct?

A great way to ensure that your income statement is correct is to compare it to the company’s cash flow statement. Large profits must be supported by significant cash flows and vice versa. Using accounting software can also help to reduce the risk of human error.

What’s the difference between horizontal and vertical income statement analysis?

With a horizontal income statement analysis, you would look at the relationships between line values across different reporting periods. With a vertical analysis, you would focus on the relationships between different line items in a single reporting period.

About the Authors

Tetiana Sitiugina-Babiuk

Written by: Tetiana Sitiugina-Babiuk

Financial Sector Specialist and Content Strategist

Independent writer, content strategist, and financial sector specialist. Tatiana has an extensive experience in working with financial institutions such as Bank of Canada and Risk Management unit at FinDev Canada. She holds an MA in Financial Risk Management from the University of Toronto.

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