Income Statement Template
The standard income statement format, ready in Excel and PDF, with every subtotal as a formula.
Part of the free set on our profit and loss statement template page. No sign-up and no email form.
What is in this template
The template follows the standard order from the top line to the bottom line, with a subtotal after each step so you can see where profit is made:
- Revenue and cost of revenue, giving gross profit.
- Operating expenses in seven lines, from salaries to other, giving total operating expenses and operating income.
- Interest and other income and interest and other expense, giving income before taxes.
- Income tax expense, giving net income.
Every subtotal in the Excel file is a formula, so you only type the lines. Rename any operating expense line to suit your business; the totals do not care what the lines are called.
| Line | Amount |
|---|---|
| Revenue | |
| Cost of revenue | |
| Gross profit | |
| Operating expenses | |
| Salaries and wages | |
| Rent | |
| Software | |
| Marketing | |
| Insurance | |
| Utilities | |
| Other | |
| Total operating expenses | |
| Operating income | |
| Interest and other income | |
| Interest and other expense | |
| Income before taxes | |
| Income tax expense | |
| Net income | |
How to prepare an income statement
Choose the period
A month, a quarter or a year. Every figure on the statement has to come from the same dates.
Total your revenue
Add up sales and fees earned in the period, less any refunds you gave.
Subtract cost of revenue
Take off the direct cost of what you sold or delivered. The result is gross profit.
List operating expenses
Salaries, rent, software, marketing and the rest. Gross profit minus their total is operating income.
Add other items
Interest earned and interest paid, or a one-time gain or loss, come next and give income before taxes.
Subtract income tax if your business pays it
A corporation shows its income tax here. What is left is net income.
An example
A made-up design studio taxed as a corporation, for one year. It earns 186,000.00, keeps 144,500.00 after the cost of delivering the work, and reaches operating income of 30,000.00. Interest and income tax take it to 22,752.00 of net income.
| Line | Amount |
|---|---|
| Revenue | 186,000.00 |
| Cost of revenue | 41,500.00 |
| Gross profit | 144,500.00 |
| Operating expenses | |
| Salaries | 82,000.00 |
| Rent | 14,400.00 |
| Software | 6,300.00 |
| Marketing | 5,200.00 |
| Insurance | 2,900.00 |
| Other | 3,700.00 |
| Total operating expenses | 114,500.00 |
| Operating income | 30,000.00 |
| Interest expense | 1,200.00 |
| Income before taxes | 28,800.00 |
| Income tax expense | 6,048.00 |
| Net income | 22,752.00 |
Not accounting, tax or legal advice. Check every figure before you sign or submit it. Some lenders require a statement prepared by an accountant.
Mistakes to avoid
- Mixing periods. Revenue for the year with expenses for eleven months gives a profit that never happened. Every line has to cover the same dates.
- Putting overhead in cost of revenue. Cost of revenue is the direct cost of what you sold. Rent, office salaries and marketing are operating expenses, and moving them up makes gross profit look worse than it is.
- Counting loan payments in full. Only the interest belongs on the income statement, on the interest line. The principal reduces the loan on the balance sheet.
- Treating owner draws as salaries. In a sole proprietorship or partnership, draws are not an expense. Wages paid to an owner through payroll in a corporation usually are.
- Adding income tax that the business does not pay. Leave the income tax line at zero if the business is taxed through the owners' personal returns.
A quick test catches most of these: net income should be close to the change in the business's cash over the period, once loans, owner draws and large purchases of equipment are taken out.
Income statement or profit and loss statement
They are the same report under two names. Accountants, investors and annual reports tend to say income statement; small business owners and lenders tend to say profit and loss statement, or P&L. If you want the plain-English version of what each line means, read what a P&L statement is.
The income statement shows a period. It pairs with the balance sheet, which shows a single date: net income for the year flows into equity on the balance sheet. Our balance sheet template completes the set.
Questions
What is the standard income statement format?
The standard format starts with revenue, subtracts cost of revenue to show gross profit, then subtracts operating expenses to show operating income. Other income and expenses, such as interest, come next, then income tax, and the statement ends with net income. This template follows that order, with each subtotal written as a formula.
How do I make an income statement from my records?
Pick the period and total your revenue for it. Subtract the direct cost of what you sold, list your operating expenses, and add other items such as interest. If the business pays income tax, subtract it last. The template does every subtraction for you once the figures are in place.
Does this template use the single step or multi step format?
It uses the multi step format, which shows gross profit and operating income on the way to net income, so margins are easy to read. If you want the shorter single step layout, the multi step income statement page shows both versions side by side, built from the same figures.
Does a small business income statement include income tax?
Only some do. A business taxed as a corporation shows income tax expense on its income statement. Most sole owners and pass-through businesses, such as partnerships and many LLCs, pay income tax on their personal returns instead, so their statements usually stop at net income before tax. Ask your tax preparer how your business is taxed.
Can I open the income statement template in Google Sheets?
Yes. Download the Excel file, then in Google Drive choose New, then File upload, and open it with Google Sheets. The subtotals are ordinary formulas, so gross profit, operating income and net income keep updating as you type your own figures.
What is the difference between revenue and net income?
Revenue is the top line: everything the business sold in the period, before any cost comes off. Net income is the bottom line, what is left after cost of revenue, operating expenses, interest and tax. In the design studio example on this page, revenue of 186,000.00 comes down to net income of 22,752.00.