The function of an Income Statement is to show you the results of your Startup in a given period of time. You have to include ALL the revenues and ALL the expenses that you have incurred on that specific period.
The basic equation of this component is the following: Net Income=Total Revenues - Total Expenses
Total Revenues refer to a value that varies depending on the monetary profits or valuation of assets that your Startup obtained causing an increase in the final result of the Net Income.
Total Expenses refer to a value that varies depending on the payments that the Startup must do but also equipment and infrastructure’s depreciation and amortization or other types of losses causing a decrease in the final result of the Net Income.
To conclude this article, we will leave you with an example of an Income Statement for you to easily understand how to organize the revenues and expenses of your business model. You should always take into consideration the values in unit terms and also in relative terms (percentages) to understand the final “slice” that you will effectively obtain regarding the whole sales of the Startup.
In this specific example of an Income Statement we try to show you with simple items how to develop this tool. We begin by stating the amount of revenues (Gross Revenues) and then we subtract all the expenses related to the company such as the cost of goods, salaries etc. At the end we become the Net Income result.