A personal income statement helps you analyze expenses and revenues over a period of time or at a given point in time. It can be an effective budgeting tool if used properly.
Definition
An income statement is also known a statement of profit and loss or statement of earnings. It indicates revenues earned and expenses incurred over a period of time.
Significance
A statement of earnings is important because it helps you gauge the amount of disposable income, or net income, available to invest in retirement accounts, plan a vacation or save for college education.
Income
On a personal income statement, income represents salaries and bonuses you receive from a labor contract. If you own a small business, income reflects sales revenue.
Gains
A gain is income you earn from secondary activities. Examples include gains in financial market activities or on a sale of property. This also needs to be included.
Expenses
An expense is a cost of living, such as a bill, or a charge you incur from borrowing activities. Examples include rent, utilities and mortgage interest.
Losses
Losses are expenses you incur from secondary activities. Examples include losses in financial market activities or on a sale of property.
