10 Step- Guide To Preparing An Income Statement

An income statement denotes the profit/loss made by your company in a given period of time. For this, you need to keep your accounting books in order and then calculate how your business is performing. Luckily you don’t need to do it all by yourself; you can use free online invoicing software for the same purpose. 

You can choose to generate monthly, quarterly, or yearly income statements. Getting these statements correct is necessary as it can directly impact your business. To make a comprehensive income statement that gives all relevant business details, you can follow these steps. 

1. Decide On A Reporting Period

The first step is to choose the time period your report will cover. 

While publicly traded companies need to prepare income statements quarterly and annually, small businesses are not that adept and regular at reporting. 

But creating them will help you identify trends that will lead to reduced expenditures and increased profits. This, in turn, will let you make business decisions that boost growth. 

2. Make a Trial Balance Report

A free invoice generator app will let you generate a standard trial balance report with no hassles. 

These are internal documents that have details on the end balance of each account for a given reporting period. 

They will give you all facts and numbers you need to create an income statement.

3. Calculate and Add Your Revenue

Your revenue will include all the money you have accumulated from your services during the reporting period. You will need to add payments that you have not received as yet too. 

4. Calculate Cost of Goods Sold

Your cost of goods will need to have all the materials and overhead expenses added. Once you have these costs with you, add up all these and then add them to your report below the revenue line item.

5. Calculate the Gross Margin

Once you have calculated the cost of goods you have sold, the next step is to calculate the gross margin. This will give you the exact amount of money you made from selling your goods and  services. 

6. Add Operating Expenses

The next step is to note down and add all operating expenses to your report. You can refer to your free invoice generator app to know about your expenses. 

You will need to add this figure below the selling and administrative expenses section. 

7. Count Your Income

All said and done; now you need to minus your admin expenses from your gross margin. This amount will go in the bottom section of your income statement.

8. Add Income Taxes

You need to multiply the state tax rate with your revenue (pre-tax) to get this figure right. 

9. Jot Down Net Income

Now, you will need to mention your net income. For this, you will need to minus the exact income tax figure from the pre-tax figure. Once done, you have to add this to your income statement. This will help you analyze your business performance and calculate your profits. 

10. Complete the Statement

Now, you are all done, you just need to add a header to the report. Also, you will need to check for details if you missed any and then add the reporting period for the same. This can easily be found using your free online invoicing software

All the data that you have organized counts for an accurate income statement. Keep it safe, as you can always refer to it when you make other statements. 

Wrapping Up 

So, this is how you can create an invoice statement using free online invoicing software. Having all these details in hand will help you achieve business objectives with ease and make more profits. So, searching for a good and free invoice generator app need not be difficult! Allow us to help you find one that best fits your needs!  

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