Profit And Loss Statement Hide Mandatory Field For Free

It does NOT include selling or administrative expenses (these expenses are listed elsewhere on the P & L statement). For service and professional companies, there will be no cost of goods sold.

Dividends will not be found on the income statement. Dividends represent a distribution of a company's net income. They are not an expense and they do not need to be paid. Rather, if a company has a net income and decides they want to pay a dividend they can.

Net income from the bottom of the income statement links to the balance sheet and cash flow statement. On the balance sheet, it feeds into retained earnings and on the cash flow statement, it is the starting point for the cash from operations section.

In essence, increases in revenue and gains as reported on the income statement cause stockholders' equity to increase on the balance sheet. In addition, increases in expenses and losses as reported on the income statement cause stockholders' equity to decrease on the income statement.

The cash flow statement and income statement integrate with the corporate balance sheet. The cash flow statement is linked to the income statement by net profit or net loss, which is usually the first line item of a cash flow statement, used to calculate cash flow from operations.

The main link between the two statements is that profits generated in the income statement get added to shareholder's equity on the balance sheet as retained earnings. Also, debt on the balance sheet is used to calculate interest expense in the income statement.

Each period, net income from the income statement is added to the retained earnings and is reported on the balance sheet within shareholders' equity. Retained earnings are a key component of shareholder equity and the calculation of a company's book value.