Income statement template (download for Excel)
The income statement is one of the core financial statements for a business. Download an income statement template with multi-step and single-step variations.
The income statement is one of the core financial statements used in business and finance to assess the profitability of a company over a specific period.
It’s useful for anyone running a business or planning personal finances.
In this guide, we show you how to complete an income statement with a template for you to download.
We also highlight the different types of income statements to consider such as multi-step or single-step, and differences in recording revenue, such as Operating Revenue or Non-Operating Revenue.
Here’s what we’ll cover:
What is an income statement?
An income statement shows the revenue and expenses of a company and calculates if the company made a profit or loss in a specific period.
An income statement is also known either as a profit and loss statement (P&L) or as a statement of comprehensive income.
The income statement is part of a set of financial statements, including the balance sheet and cash flow statement, that offer a comprehensive view of the financial health of a company.
Unlike a balance sheet which shows a snapshot of a company’s financial position at a single point in time, an income statement shows activity over a period of time, usually a month, a quarter, or a year.
It’s a dynamic view of the financial activities and the results of those activities during the covered period.
The statement usually compares periods of time either month on month (MoM), or year on year (YoY).
Income Statement Templates
Download this multi-step and single step income statement templates.
Why produce an income statement?
It’s important for companies to produce financial statements on a regular basis.
Not just for regulatory compliance, but also to keep track of their financial position, financial performance, and their cash flow.
This information helps a company to make economically informed choices for their strategy.
It also provides an overview of the value of the company and allows stakeholders to review the performance of the management team.
An income statement can help to show:
- If sales are improving and the impact this has on profitability
- If the cost of goods are increasing out of line with sales
- If expense cuts have affected profitability
- Areas for spending cuts
- Areas for growth
- If profits are improving
An income statement is useful for both internal financial management and external stakeholders:
- Management can track revenue and expenses, providing a clear picture of what drives profits and where costs can be managed better.
- Investors are able to assess profitability, trends in expenses and the efficiency of company operations over time.
- Lenders can determine a company’s ability to generate enough profit to cover new and existing debt obligations.
What’s included in an income statement?
An income statement comprises sections that cover:
- Revenue
- Expenses
- Gains
- Losses
The structure of the statement and lines of information included depend on the type of income statement and the type of company.
For example, multi-step or single-step, and service-based or goods-based companies.
The following key components are contained in most income statements:
Revenue
Revenue, or sales/income generated is the first section on the statement and represents how much money the company earned from its primary business activity (goods or services).
The amount shown here is before any costs or expenses are deducted.
On a single-step income statement, other revenue can also be listed here, such as interest from investments under the Non-Operating Revenue line.
On a multi-step, these would be shown after Operating Income (EBIT).
Note that any extraordinary revenue is usually separated and listed under Below-The-Line items towards the end of the statement.
Cost of Goods Sold (COGS)
Cost of Goods is shown as a stand-alone section in the multi-step income statement, but not in a single-step statement.
COGS includes all direct costs that relate to the production of goods, such as materials and direct labour.
For a service-based company, COGS would cover items such as external contractors related to the service.
Gross Profit
Gross Profit is determined by a basic calculation of subtracting COGS from revenue.
Gross Profit shows how much a company earns from its core business operation before operating expenses are factored in. It can also reflect how efficient a company is at managing its production costs.
Operating expenses
Expenses related to all business costs that are not COGS and not directly applied to the production of the goods or services.
Operating expenses are costs necessary for general operations of the business, such as salaries of non-production staff, marketing expenses, and rent.
Depreciation & amortisation expense
Depreciation relates to the decrease in value of tangible assets in the company, such as buildings, machinery and equipment that over time will lose value due to wear and tear and age.
This expense is calculated using various methods (like straight-line, diminishing balance, or units of production) that spread the cost of the asset over the expected duration of its useful life.
The purpose of depreciation is to match the cost of an asset to the revenue it generates.
Amortisation relates to spreading the cost of intangible assets such as patents, copyrights, software, or goodwill.
For example, a patent that is valid for ten years would be amortised by dividing the cost of the patent by ten.
Each part of that cost would be charged over the ten-year period.
Depreciation and amortisation are essential to show an accurate financial view of a company by considering the cost of long-term assets.
These expenses are also tax deductible and reduce the taxable income of the company.
Operating income (EBIT)
Operating income, or Earnings Before Interest and Taxes (EBIT) is calculated by subtracting operating expenses from gross profit.
This number shows how much Gross Profit is consumed by Operating Expenses and reflects on the efficiency of the management team in running the company profitably.
Income Statement Templates
Download this multi-step and single step income statement templates.
Non-operating revenues, expenses, gains, losses
This line covers income from activities that are not part of a company’s primary business operations.
Non-operating revenues might include income from investments, rental income, or gains from the sale of assets not used in the main line of business.
Non-operating expenses cover costs such as interest paid on debt, losses from lawsuits, or losses on the disposal of assets.
Gains and losses would come from events such as the sale of investment securities or real estate, foreign exchange differences, or restructuring costs.
These items are listed on the income statement to show a distinction between the core business activities and incidental activity.
This allows stakeholders to understand the company’s operational efficiency and financial health from its regular business versus other sources.
Earnings Before Tax (EBT)
EBT, or Pre-Tax Income relates to the income from the company’s main and other operations minus all expenses and before taxes are deducted.
This is calculated by subtracting all operating expenses, interest expenses, and other relevant costs from total revenue.
EBT is a starting point for calculating income tax expense and calculating net income.
It’s also a useful number to compare the profitability of companies in situations such as where tax rates differ.
Income from continuing operations
This line shows the profit after tax and the net income from the company’s regular business activity.
Income from continuing operations excludes profits or losses from discontinued operations, extraordinary items, and other non-recurring events.
The figure shows the profitability and sustainability of the company’s primary business activities.
Below-the-line
Below-the-line items relate to any extraordinary costs for a business that are not a part of the core activities of the business.
This section is highlighted on 3 rows:
- Income from discontinued operations includes any goods or services that were discontinued during the accounting period and will cease to provide income moving forward.
- Effect of accounting changes relates to any changes in accounting policy or tax laws during the period.
- Extraordinary items include items such as paying a penalty to exit a contract.
Below-the-line items are shown as a separate line to avoid skewing the perception of the company’s operational effectiveness and to show stakeholders earnings derived from core business operations.
Net income
The bottom line of the income statement is net income, calculated by taking the operating income and adding/subtracting any other income/expenses.
Taxes are then deducted to arrive at the net income, which represents the total profit or loss the company recorded during the period.
One thing to remember is that an income statement doesn’t show the difference between cash and non-cash items that have been received in the company or bought by the company.
Some items might have been paid for on credit and the cash is yet to be received or paid.
This means that the statement is not a reflection of how much money was actually received or how much cash is in the bank.
Cash movements are shown in the cash flow statement.
Differences in income statements to consider
Income statement or statement of comprehensive income?
In South Africa, IFRS requires some companies—especially those with Other Comprehensive Income (OCI) items—to produce a statement of comprehensive income. Smaller businesses applying IFRS for SMEs may only need a basic income statement.
A statement of comprehensive income can be presented in one of two ways:
- As a single combined statement that includes both profit and loss and comprehensive income, or
- As two separate statements: one for the income statement and another for comprehensive income.
When presented separately, these two parts together make up the full statement of comprehensive income.
Note:
This is not the same as the “single-step” or “multi-step” income statement formats discussed below.
Those refer to the layout used to present revenue and expenses—not the scope of what’s included.
The statement of comprehensive income includes additional items not yet realised, such as gains or losses on foreign currency translation or revalued assets.
These provide a more complete picture of a company’s total financial performance.
Companies may produce this statement either to comply with IFRS regulations or to give stakeholders a more in-depth analysis of their financial position.
Nature or function?
In the income statement, the Operating Expenses can be categorised as either ‘nature’ or ‘function’.
Each method gives a different perspective and can be more useful in certain types of financial analysis or for certain types of businesses.
The choice between these two methods depends on the company’s reporting goals, the nature of its operations, and sometimes regulatory requirements.
- Function relates to cost of sales, distribution costs and admin expenses. It provides insight into operational efficiency by showing how expenses relate to specific operational areas.
- Nature relates to raw materials, wages and depreciation. It offers clarity about the actual economic elements impacting financial results.
Under IAS 1 (International Accounting Standard 1: Presentation of Financial Statements—a core standard within the IFRS framework), companies that classify expenses by function (e.g. cost of sales, administrative expenses) are also required to disclose the nature of those expenses (such as depreciation and employee costs) in the notes to the financial statements.
Income Statement Templates
Download this multi-step and single step income statement templates.
Single-step or Multi-step income statement?
An income statement can be presented in two ways, either single-step or multi-step.
Both of these statements provide the net income, but are slightly different in the layout and detail provided.
Single-step income statements are more straightforward, showing revenue and expenses with a simple one-step equation.
These types of income statements are usually used by smaller businesses.
A multi-step income statement provides a more detailed view by breaking down the operating revenues and expenses from the non-operating ones and highlighting several key components of financial performance such as gross profit, operating income, and net income.
The multi-step format is preferred by larger companies or those with more complex business operations, such as manufacturing or distribution companies.
Income statement templates
How to use the income statement template
Download the income statement template here.
In the template spreadsheet, there are two tabs.
Select a multi-step or a single-step income statement based on your business size and needs.
In the sheet, only input figures into the grey boxes where indicated. All other boxes have formula calculations and will automatically calculate for you.
Multi-step income statement
Select a reporting period
At the top of the statement, input the year, quarter, or month period to compare.
Copy and paste the column for additional periods.
Input revenue
Input all revenue and sales.
You can prepare a statement just for one area or product.
Returns, Refunds and Allowances are input as a negative number.
Cost of goods sold
On the multi-step income statement, input the COGS divided into purchases, materials, labour and overhead related to the direct production of goods.
Gross profit
Gross profit is calculated by subtracting total cost of goods from total net revenue
Operating expenses
Input all expenses into the relevant categories. You can add extra rows or rename rows as needed.
Operating income EBIT
Operating income EBIT is calculated from gross profit minus total operating expenses
Non-operating revenues and expenses
Non-operating revenues and expenses, input income from investments, rental income, or gains from the sale of assets not used in the main line of business, interest paid on debt, losses from lawsuits, or losses on the disposal of assets, events such as the sale of investment securities or real estate, foreign exchange differences, or restructuring costs.
Income Before Taxes (EBT)
Income Before Taxes (EBT) is calculated by subtracting non-operating revenues and expenses and interest expense from Operating income EBIT.
Income from continuing operations
Income from continuing operations is calculated by subtracting income tax expense from Income Before Taxes.
Below-the-line items
Below-the-line items, input in the following fields:
- Income from discontinued operations: input any goods or services that were discontinued during the accounting period and will cease to provide income moving forward.
- Effect of accounting changes: input any changes in accounting policy or tax laws during the period.
- Extraordinary Items: input any other irregular items, such as paying a penalty to exit a contract.
Net income
Net income is calculated by adding together all Income from Continuing Operations and all Below-The-Line items.
Single-step income statement
Select a reporting period
At the top of the statement, input the year, quarter, or month period to compare.
Copy and paste the column for additional periods.
Input revenue
Input all revenue and sales into the appropriate row and delete as necessary for sales, services, or interest.
Returns, refunds and allowances are input as a negative number.
Total Net Revenue
Total Net Revenue is calculated as a sum that adds all revenue and subtracts returns, refunds and allowances.
Operating expenses
Operating expenses input all expenses into the relevant categories. You can add extra rows or rename rows as needed.
Net Income before Taxes
Net Income Before Taxes is calculated by subtracting Total Operating Expenses from Total Net Revenue.
Income from continuing operations
Income from continuing operations is calculated by subtracting income tax expense from Income Before Taxes.
Below-the-line items
Below-the-line items, input in the following fields:
- Income from discontinued operations: input any goods or services that were discontinued during the accounting period and will cease to provide income moving forward.
- Effect of accounting changes: input any changes in accounting policy or tax laws during the period.
- Extraordinary items: input any other irregular items, such as paying a penalty to exit a contract.
Net income
Net income is calculated by adding together all Income from Continuing Operations and all Below-The-Line items.
FAQs
Do all businesses have to produce an income statement?
Even in cases where it is not legally required, maintaining an income statement is considered a best practice for effective business management.
Almost all businesses are expected to produce an income statement, though the specific requirements can vary depending on the size of the business and its legal structure.
Public companies and state-owned entities
The Companies Act 71 of 2008 requires all registered companies to maintain accurate financial records.
Publicly listed and certain other entities must prepare financial statements, which include the income statement, balance sheet, and cash flow statement, in accordance with International Financial Reporting Standards (IFRS).
State-owned entities may use standards of Generally Recognised Accounting Practice (GRAP) or International Financial Reporting Standard (IFRS) based on a criteria in Directive 12 – The Selection of an Appropriate Reporting Framework by Public Entities
Learn more about how to create a cash flow statement with a free template for you to download.
Private companies
Private companies must also prepare annual financial statements. Whether these need to be audited or independently reviewed depends on factors such as:
- The company’s public interest score
- Whether the company is owner-managed
- Whether it holds assets in a fiduciary capacity
Even if not legally required to audit, private companies are still expected to maintain income statements for internal decision-making, tax compliance, and stakeholder reporting.”
Small businesses and sole proprietorships
For sole proprietors and micro-enterprises, there is no statutory requirement to produce formal income statements. However, doing so is highly recommended because it helps you to:
- Track profitability
- Prepare for tax submissions to SARS
- Support loan or grant applications
Non-profits
NPOs must prepare financial statements, including an income statement (often called a statement of financial performance or statement of activities), to demonstrate how funds are received and spent.
This is essential for transparency and compliance with the Nonprofit Organisations Act.
Startups
While from a regulatory perspective startups are not immediately required to produce formal income statements, they often need to prepare these financial statements to secure funding from investors or banks.
The information also helps them to monitor their burn rate and path to profitability.
Income statement or balance sheet?
An income statement represents a period of time, for example, a financial quarter or year.
A balance sheet is a snapshot of a fixed point in time.
An income statement and a balance sheet are 2 fundamental financial statements used in business, but they serve different purposes and present different types of financial information.
Income statement
An income statement measures a company’s financial performance over a specific period—usually a quarter or a year.
It focuses on the company’s revenues, expenses, and profits or losses during the reporting period.
The primary purpose of the income statement is to showcase how the revenues are transformed into net income (or net loss) by deducting all expenses from the total revenue.
This includes operating expenses, cost of goods sold, taxes, and other expenses.
It provides a dynamic view of the business operations, indicating how well the company can generate profit from its operations.
Balance sheet
In contrast, the balance sheet provides a snapshot of a company’s financial condition at a particular point in time, detailing what the company owns (assets) and owes (liabilities), along with the equity held by shareholders.
The balance sheet is structured around the fundamental equation:
Assets = Liabilities + Shareholders’ Equity
It provides critical information on a company’s liquidity, solvency, and capital structure and is vital for assessing the company’s financial stability and capability to handle its obligations.
Together, the income statement and balance sheet provide a comprehensive view of a company’s financial health, each from a different perspective, but both are essential for a complete financial analysis.
What is the difference between operating revenue and non-operating revenue?
Operating revenue relates to monies received for the company’s core activity, such as the sale of products or services.
Non-operating revenue refers to other sources of income, such as interest income from capital held in a bank or income from rental of business property.
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