There are various titles for income statements. From Income Statement to Revenues in Excess, there are many different titles for the profit report based on business sector and the respective industry.
Financial statements serve the purpose of presenting economic activity and status related to a particular date and over a particular time frame. Accountants record monetary transactions and via financial reports present the information in an easy to understand format. The financial statements for a small business do not have to comply with those of publicly traded operations.
Deferred or unearned revenue is an advance payment made by a customer for a product or service that has not yet been rendered (delivered).
Accrual accounting is the preferred method of accounting for all business operations. Any publicly traded company must comply with the principles of accrual accounting. Small business operations can choose between cash and accrual accounting for their records. Although cash accounting is the easiest to work with as a small business operation, accrual accounting will provide a more accurate picture of the financial status and affairs of any business operation.
Non-physical assets are expensed to the income statement or profit and loss statement via a method called amortization. It is most commonly used in the mortgage industry to refer to the monthly payment made to pay interest and the principal (the amortizable portion) on a debt instrument.
Simply stated, accounting is the measurement of economic activity. Its primary principle is to report information to the user so that (s)he can make informed decisions. The primary reporting format is in the form of dollars. There are two important reports used by pretty much 99% of all business operations to determine the status of the business operation. These are the income statement and the balance sheet.
