Part 2: The Income Statement
The Income Statement is one of the three financial statements that you will need to include in your Financial Plan section of the Business Plan.

The Income Statement will show all your revenues and expenses. In the end you will see if you had made a profit or not—also known as net income. If your expenses exceed your income it is considered a net loss.

While you get a business up and running, normally an Income Statement is made each fiscal quarter, or even once each fiscal year for the purpose of the Income Statement. The income statement should be generated more frequently, probably every month for the first year you business is operating.

Here is a basic outline for an Income Statement for a service based business:

Your Business Name
Income Statement for the year ending

Revenue
Services

  • Service 1
  • Service 2
  • Service 3

TOTAL Revenue: Services
REVENUE: Miscellaneous
Bank Interest
TOTAL Revenue: Get total here

Expenses
Direct Costs

  • Materials
  • Equipment
  • Salary (Owner)
  • Wages

TOTAL DIRECT COSTS

General And Administration

  • Accounting and Legal Fees
  • Advertising and Promotion
  • Bad Debts
  • Bank Charges
  • Depreciation and Amortization
  • Insurance Expense
  • Interest Expense
  • Office Rent
  • Telephone
  • Utilities

TOTAL General and Administration
TOTAL Expenses
Net Income Before Income Tax:
Income Taxes:
Net Income or Net Loss:

Keep in mind that not all these categories will belong on your income statement depending on what type of business you plan on starting up. Leave the ones that don’t apply out and add categories when necessary to adapt this example Income Statement to best fit your business.

If you run a product based business, the Revenue section of the Income Statement will look different. Your revenues section will be replaced by Sales, and inventory to be accounted for. This is also known as the multi step income statement, For example:

Sales:
(Sales Discount):
(Sales Return and Allowances:
Net Sales:
(Cost of Goods Sold):
Gross Profit:
(Operating Expenses):
Net Income or Net Loss:

** Note: All the ones with (brackets) around them mean subtract.

This almost wraps up our business plan, but tomorrow we will move on to the next financial statement section of your business plan, and that is the Cash Flow Projection.

Part 1: The Financial Plan of The Business Plan - Financial Statement
Part 2: The Financial Plan of The Business Plan - Income Statement
Part 3: The Financial Plan of The Business Plan - Cash Flow Projections

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