Money Matters

Income statement template: Free Excel download and examples

Learn what an income statement is and download an income statement template with single-step and multi-step variations to help track business performance.

Published July 30, 202618 min read Share

This article was originally published on July 15, 2024 but has been refreshed and re-published with new content on July 30, 2026.

The income statement is one of the core financial statements used to measure a company’s profitability. Understanding what an income statement is, what it includes, and how to prepare one can help you gain better visibility into your business’s financial performance.

Start by downloading our free income statement template for Excel. Then, learn how to use it, explore common income statement formats and reporting standards, and see examples that can serve as a sample income statement for Excel.

Key takeaways

• An income statement shows whether a business made a profit or loss over a specific reporting period.
• Single-step and multi-step income statements provide different levels of financial detail depending on your business needs.
• Comparing income statements over time can help identify profitability trends, rising costs, and opportunities to improve performance.
• The downloadable template automatically calculates key totals, making it easier to prepare accurate financial statements.

Here’s what we’ll cover

What is an income statement?

An income statement is a financial report that shows a company’s revenue and expenses over a specific reporting period to determine whether it made a profit or a loss.

Also known as a Profit and Loss (P&L) statement, it is one of the three core financial statements used to evaluate a company’s financial performance.

Alongside the balance sheet and cash flow statement, the income statement provides a more complete picture of a company’s financial health. It helps explain whether a business is generating profit and how its operating performance changes over time.

Because an income statement covers a specific reporting period, such as a month, quarter, or year, you can compare statements over time to identify trends in revenue, expenses, and profitability. These comparisons support better financial planning and business decisions.

What is the income statement formula?

The basic income statement formula is Revenue − Expenses = Net income. Multi-step income statements expand on this calculation by introducing subtotals such as gross profit and operating income before arriving at net income.

Income statement versus balance sheet: What’s the difference?

An income statement and a balance sheet are two of the three core financial statements used to evaluate a company’s financial health, but they answer different questions.

An income statement shows whether a company makes a profit or loss over a period of time.

A balance sheet shows what the company owns, owes, and retains at a specific point in time.

	Income statement	Balance sheet
Purpose	Shows how the business performed over a reporting period.	Shows the company’s financial position at a specific point in time.
Time period	Covers a period, such as a month, quarter, or year.	Reflects one specific date.
What it reports	Revenue, expenses, and net income or loss.	Assets, liabilities, and shareholders’ equity.
Primary focus	Profitability and operating performance.	Liquidity, solvency, and financial stability.
Key takeaway	Shows how revenue becomes profit after expenses.	Shows what the company owns, owes, and its equity.
Core formula	Net income = Revenue − Expenses	Assets = Liabilities + Shareholders’ equity

The income statement and balance sheet are most useful when read together. The income statement shows whether a business is generating profit over time, while the balance sheet shows its financial position by summarizing assets, liabilities, and equity.

Together with the cash flow statement, these financial reports provide a more complete view of a company’s financial health by showing profitability, financial position, and cash movement.

Why produce an income statement?

Producing an income statement regularly helps businesses monitor financial performance, understand profitability, and meet reporting requirements.

By comparing income statements across reporting periods, businesses can see whether changes in profit are being driven by declining sales, rising costs, higher operating expenses, or changes in pricing.

These insights can support decisions around budgeting, cost control, pricing, investment, and future growth.

An income statement can help show:

• Whether revenue growth is translating into profit.
• How expenses are affecting profitability.
• Which costs may need closer review.
• Whether operating performance is improving or declining over time.
• Where there may be opportunities to improve efficiency or support growth.

As reporting needs become more complex, financial reporting software can help centralize financial data, automate reporting, and improve visibility across the business.

An income statement is also valuable for different stakeholders:

• Management can monitor revenue, expenses, and profit to understand what drives financial performance.
• Investors can evaluate profitability, expense trends, and how efficiently the business operates over time.
• Lenders can assess whether the business generates enough profit to support existing and future debt obligations.

Do all businesses have to produce an income statement?

Not always. In the US, whether a business has to produce an income statement depends on its legal structure, size, tax status, ownership, and reporting obligations.

Even when a formal income statement is not legally required, preparing for one is regularly considered a best practice.

It helps businesses monitor financial performance, plan for taxes, support funding applications and meet the expectations of investors, lenders, and other stakeholders.

Want to complete your financial reporting toolkit? Download our cash flow statement template to help track how cash moves in and out of your business.

Publicly traded companies

Public companies in the US are required to prepare and file financial statements, including an income statement, balance sheet, and cash flow statement.

Companies subject to Securities and Exchange Commission (SEC) reporting requirements generally file annual reports using Form 10-K and quarterly reports using Form 10-Q.

Private companies

Private companies are not subject to the same public reporting requirements as publicly traded companies, but they often prepare income statements for financial management, tax planning, financing applications, and investor or lender reporting.

Small businesses and sole proprietorships

Smaller businesses and sole proprietorships may not need to prepare formal financial statements for public reporting. However, an income statement is still useful for tracking revenue, expenses, and profit, planning for taxes, and providing financial information when applying for loans or funding.

Nonprofits

Nonprofit organizations prepare financial reports to show how funds are received and used during a reporting period. The income-statement equivalent is often called a statement of activities, which supports transparency and accountability to donors, boards, members, and regulators.

Startups

Startups may not need formal income statements in their earliest stages, but they often prepare them to monitor burn rate, manage costs, and show investors or lenders how the business is progressing toward profitability.

What’s included in an income statement

Most income statements include the following key components:

• Revenue
• Direct and operating expenses
• Profitability measures, such as gross profit, operating income, and earnings before tax
• Income tax expense
• Net income or loss
• Discontinued operations or other non-recurring items, when applicable

Most income statements follow the same overall structure, although the exact layout varies depending on the type of business and whether a single-step or multi-step format is used.

Revenue

Revenue, also referred to as sales or income, is the first section of an income statement and represents the money a business earns from its primary activities, such as selling products or providing services. This amount is reported before any costs or expenses are deducted.

The presentation of additional revenue depends on the income statement format. In a single-step income statement, other revenue, such as investment interest, may be included within total revenue. In a multi-step income statement, non-operating revenue is reported separately after operating income.

Depending on the nature of the transaction, unusual or infrequent gains may be reported separately from operating revenue to provide a clearer view of the company’s recurring business performance.

Cost of Goods Sold (COGS)

Cost of Goods Sold (COGS) appears as a separate section in a multi-step income statement but is combined with other expenses in a single-step income statement.

COGS includes the direct costs of producing or delivering a company’s goods or services, such as raw materials, direct labor, and manufacturing costs. For service-based businesses, COGS may include costs directly related to delivering services, such as contractor or subcontractor fees.

Separating COGS from other operating expenses helps businesses calculate gross profit and better understand the direct costs associated with producing goods or delivering services.

Gross profit

Gross profit is calculated by subtracting COGS from revenue. It shows how much revenue remains after covering the direct costs of producing goods or delivering services.

This figure helps businesses evaluate whether sales are generating enough revenue to cover production costs before operating expenses are considered. Monitoring gross profit over time can also help identify changes in pricing, profit margins, or production and service delivery costs.

Operating expenses

Operating expenses include the day-to-day costs of running a business that are not directly related to producing goods or delivering services.

These expenses typically include salaries for non-production staff, marketing costs, rent, utilities, and other administrative expenses.

Tracking operating expenses separately from COGS helps businesses understand how efficiently they manage their ongoing operations and identify opportunities to control costs without affecting production.

Depreciation and amortization

Depreciation is the gradual reduction in the value of tangible assets, such as buildings, machinery, and equipment, over their useful lives due to normal wear and tear.

Businesses calculate depreciation using methods such as straight-line, declining balance, or units of production to spread an asset’s cost over its useful life.

Amortization follows the same principle but applies to intangible assets, such as patents, copyrights, software, and goodwill. For example, if a patent has a useful life of ten years, its cost is typically allocated evenly across that period.

Recording depreciation and amortization provides a more accurate view of financial performance by matching the cost of long-term assets with the revenue they help generate.

These expenses may also reduce taxable income, depending on the applicable accounting and tax rules.

Operating income

Operating income is closely related to Earnings Before Interest and Taxes (EBIT), although the two are not always calculated in exactly the same way. Operating income is generally calculated by subtracting operating expenses from gross profit.

Because it focuses on a company’s core business activities before financing costs and income taxes are considered, operating income helps businesses, investors, and analysts evaluate operating performance and compare profitability across reporting periods.

Non-operating revenues, expenses, gains, and losses

Non-operating revenues, expenses, gains, and losses relate to activities outside a company’s core business operations. Reporting these items separately helps distinguish recurring operating performance from financing activities, investments, and other one-time events.

Examples include:

• Non-operating revenue: investment income, rental income, or gains from the sale of assets that are not part of the company’s primary business.
• Non-operating expenses: interest paid on debt, legal settlements, or losses from the disposal of assets.
• Gains and losses: foreign exchange fluctuations, gains or losses from selling investments or real estate, or business restructuring.

Separating these items from operating results provides a clearer view of the company’s ongoing operating performance.

Earnings Before Tax (EBT)

Earnings Before Tax (EBT), also referred to as pre-tax income, represents a company’s profit after operating and non-operating items have been accounted for, but before income taxes are deducted.

Because it excludes the impact of income tax, EBT provides a consistent way to compare the profitability of businesses operating in different tax jurisdictions.

EBT also serves as the starting point for calculating income tax expense and determining net income.

Income from continuing operations

Income from continuing operations represents the profit a company earns from the parts of its business that are expected to continue operating after income taxes have been deducted.

It excludes profits or losses from discontinued operations and other one-time events, providing a clearer view of the company’s ongoing operating performance.

Because it focuses on recurring business activities, income from continuing operations helps business owners, investors, and lenders assess the company’s long-term profitability and financial stability.

Discontinued operations and non-recurring items

Discontinued operations and other non-recurring items are revenues, expenses, gains, or losses that are not part of a company’s normal business operations. Reporting these items separately helps present a clearer picture of the company’s ongoing operating performance.

This section may include:

• Discontinued operations: income or losses related to business activities that were discontinued during the reporting period and will not contribute to future operations.
• Effect of accounting changes: the financial impact of changes in accounting policies or applicable tax laws.
• Other unusual or infrequent gains and losses: significant events that are not expected to occur regularly, such as certain legal settlements, restructuring costs, or gains and losses from the sale of assets.

Separating these items from recurring operating results provides a clearer view of earnings generated by the company’s core business activities without one-time events distorting the overall picture.

Net income

Net income is the final figure on an income statement and represents the company’s total profit or loss for the reporting period. It is calculated by taking operating income, adding or subtracting other income and expenses, and then deducting income taxes.

Net income is one of the most closely monitored financial metrics because it shows the company’s overall profitability after all revenues, expenses, gains, losses, and taxes have been accounted for.

Important: net income is not the same as cash flow. Because income statements use accrual accounting, revenue and expenses may be recorded before cash is received or paid. To understand actual cash inflows and outflows, businesses should also review the cash flow statement.

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Differences in income statements to consider

While all income statements measure profitability over a reporting period, the way they are presented can vary depending on accounting standards, reporting requirements, and the complexity of the business. Understanding these differences can help you choose the right format for your business and interpret financial statements more effectively.

Income statement versus statement of comprehensive income

An income statement reports a company’s revenue, expenses, and net income over a specific reporting period. A statement of comprehensive income builds on this by including certain unrealized gains and losses that are not included in net income, providing a broader view of overall financial performance.

	Income statement	Statement of comprehensive income
What it reports	Revenue, expenses, and net income.	Net income plus certain unrealized gains and losses.
Main focus	Profitability during the reporting period.	Broader financial performance, including other comprehensive income.
Common use	Used by most businesses for standard financial reporting.	Used when accounting standards or reporting requirements require additional comprehensive income disclosures.
Presentation	Usually presented as a standalone financial statement.	May be presented as one continuous statement or as two separate but consecutive statements.

A statement of comprehensive income may be presented as a single continuous statement or as two separate but consecutive statements: an income statement followed by a statement of comprehensive income.

In either format, the objective is the same: to show net income alongside comprehensive income for a more complete view of performance.

Some organizations prepare a statement of comprehensive income to meet reporting requirements, while others use it to show changes in equity that are not reflected in net income alone.

Nature versus function expense classification

Operating expenses can be classified by either nature or function, depending on a company’s reporting approach and, in some cases, applicable accounting standards. The method used affects how expenses are presented, but not the company’s overall financial results.

	By function	By nature
How expenses are grouped	By business function, such as cost of sales, distribution, or administration.	By economic type, such as wages, depreciation, raw materials, or utilities.
What it highlights	How costs relate to different business functions.	What types of costs the business incurs.
Common use	Often used by larger or more complex organizations.	Often used to provide clearer visibility into spending categories.
Main benefit	Helps evaluate operational efficiency across business functions.	Provides clearer visibility into spending categories.

For companies reporting under International Financial Reporting Standards (IFRS), presenting expenses by function may also require additional disclosure about the nature of those expenses, such as wages, depreciation, or raw materials.

Single-step versus multi-step income statements

Income statements are commonly presented in either a single-step or multi-step format. Both calculate net income, but they organize financial information differently depending on the level of detail a business needs.

	Single-step income statement	Multi-step income statement
Structure	Combines revenue and expenses into two broad categories.	Separates operating and non-operating revenue and expenses into multiple sections.
Calculation	Uses a single calculation to determine net income.	Calculates additional subtotals, such as gross profit and operating income, before net income.
Common use	Simpler to prepare and commonly used by smaller businesses.	Often used by larger or more complex organizations, such as manufacturers and distributors.
Best suited for	Straightforward financial reporting.	Businesses that need greater insight into operating performance and profitability.

The right format depends on the size of the business, its reporting requirements, and the level of financial detail needed for decision-making.

Income statement templates

Our downloadable income statement template includes both single-step and multi-step formats, making it easy to prepare financial statements for different business needs. Each template automatically calculates key totals, helping reduce manual calculations and improve accuracy.

Whether you’re looking for a small business income statement template or a more detailed format for a growing organization, choose the option that best suits your reporting needs.

Download the income statement template here.

How to use the income statement template

Follow these steps to complete the income statement template. Both the single-step and multi-step versions use built-in formulas to calculate totals automatically, so you only need to enter information where indicated.

Step 1: Download and choose your template

Download the income statement template and select either the single-step or multi-step worksheet based on your business size and reporting needs.

Step 2: Enter figures in the highlighted fields

Only enter values in the gray cells. The remaining cells contain formulas that automatically calculate totals throughout the statement.

Step 3: Complete the template

Follow the instructions for your chosen template below to enter revenue, expenses, taxes, and any additional reporting items.

Multi-step income statement

Use the multi-step income statement if you want a more detailed view of your business’s financial performance, including gross profit, operating income, and net income.

Step 1: Select the reporting period

Enter the month, quarter, or year you want to report on at the top of the template. Copy and paste columns if you want to compare additional reporting periods.

Step 2: Enter revenue

Record all revenue and sales for the reporting period. If you’re preparing a statement for a specific business unit or product line, enter only the relevant revenue.

Enter returns, refunds, and allowances as negative values.

Step 3: Enter Cost of Goods Sold (COGS)

Record direct production costs, including purchases, materials, labor, and manufacturing overhead related to producing goods or delivering services.

The template automatically calculates gross profit by subtracting total COGS from total net revenue.

Step 4: Enter operating expenses

Record operating expenses in the appropriate categories. Add or rename rows as needed to reflect your business.

The template automatically calculates operating income

Step 5: Enter non-operating revenue and expenses

Record items such as investment income, rental income, gains or losses from asset sales, interest expense, foreign exchange gains or losses, legal settlements, or restructuring costs.

The template automatically calculates income before taxes.

Step 6: Enter income tax expense

Enter income tax in the relevant field. The template automatically calculates income from continuing operations after tax.

Step 7: Enter separately reported items

Complete the relevant fields for:

• Income from discontinued operations.
• Effect of accounting changes.
• Unusual or infrequent gains or losses, if relevant.

Step 8: Review net income

The template automatically calculates net income, giving you the final profit or loss for the reporting period.

Single-step income statement

Use the single-step income statement if you want a straightforward overview of your business’s revenue, expenses, and net income without separating operating and non-operating activities.

Step 1: Select the reporting period

Enter the month, quarter, or year you want to report on at the top of the template. Copy and paste columns if you want to compare additional reporting periods.

Step 2: Enter revenue

Record all revenue and sales in the appropriate rows. Depending on your business, you can edit or remove rows for sales, services, or interest income.

Enter returns, refunds, and allowances as negative values.

The template automatically calculates total net revenue.

Step 3: Enter expenses

Record expenses in the appropriate categories. Add or rename rows as needed to reflect your business.

The template automatically calculates net income before taxes.

Step 4: Enter income tax expense

Enter income tax expense in the relevant field. The template then calculates income from continuing operations after tax.

Step 5: Enter separately reported items

Complete the relevant fields for:

• Income from discontinued operations.
• Effect of accounting changes.
• Unusual or infrequent gains or losses, if relevant.

Step 6: Review net income

The template automatically calculates net income, giving you the final profit or loss for the reporting period.

How Sage can help

Sage accounting software helps businesses create accurate financial reports, monitor performance, and make more informed business decisions.

With more than 150 built-in financial reports, Sage Intacct makes it easy to generate, customize, and share income statements and other financial reports, helping reduce manual work and giving you more time to focus on growing your business.

Frequently asked questions about income statements

Editor’s note: This article was verified by a US-based Certified Public Accountant (CPA). Accounting rules are complex and change frequently and we recommend you seek any accounting advice from a qualified CPA.

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