What is the income statement?
The income statement is a mandatory document for any company, it will make it possible to analyse the expenses (class 6 accounts) and revenues generated (class 7 accounts). It is carried out every year generally in a calendar year, but this can vary depending on the activity.
What is the income statement for?
The income statement makes it possible to define the economic performance of the company, it is a question of knowing whether the company is in loss or in profit. If the current result before tax is positive the company will be subject to IS (Corporate tax) and if the current result before tax is negative it will not be subject to IS.
What is an income statement made up of?
The income statement is made up of 3 main parts:
Operating income
It corresponds to the result linked to the company’s activity, it is obtained by subtracting the turnover from sales minus all the charges attached to it. Insufficient operating income may reflect poor cost control or too low turnover. In this case, it is necessary to increase turnover or reduce operating expenses.
Operating result = operating income – operating expenses
The financial result
The financial result corresponds to the difference between financial income and financial expenses. A commercial enterprise is not intended to generate financial products, the result is often negative when a loan is made.
Financial result = financial income – financial charges
The exceptional result
The exceptional result includes so-called exceptional data which occurs on a non-recurring basis, such as the sale of a tangible asset (tools, premises, etc.). The exceptional result can have a significant impact on the net result, whether positively or negatively and can be misleading. It is important to take the time to read the 3 results to fully understand the accounting situation of a company.
Exceptional result = exceptional income – exceptional expenses
The bottom line
To calculate the net result, you must first add the three results obtained. It is on the basis of this amount that the tax on profits will be calculated.
The net result is then made up of the sum of the 3 results, less tax on profits and employee participation.
Thus, the net result includes all expenses and income over a given period and shows the profit or loss of a company.
Net accounting income = operating income + financial income + exceptional income – income tax – employee participation.
What is the difference between the income statement and the balance sheet?
The income statement allows you to know whether the company is in profit or in deficit while the balance sheet measures what the company owns at a given time. These two documents are complementary and are transmitted to the tax administration each accounting year.