Income Statement Reporting
The income statement is a financial report that lists a company’s revenues and expenses to
show the overall profit or loss that was incurred during a fiscal cycle. There are different
standards for how financial statements should be presented in different countries. These
standards are set in order to prevent the distortion of financial information. Generally
Accepted Accounting Principles (GAAP) is the set of standards used in the United States.
GAAP was developed by the Financial Accounting Standards Advisory Board, and it is the
legal set of guidelines that must be abided by when preparing financial statements.
GAAP was originally composed of several thousands of documents that have been
developed over the past 70 years. These documents include research bulletins, FASB
standards, interpretations, and opinions. Since these documents varied greatly in format
and structure, the FASB developed what is known as “the Codification”, which simplifies
the access to GAAP’s standards for a particular topic. (Kieso, Weygandt, and Warfield
13-14)
GAAP has four basic principles: the historical cost principle, the revenue recognition
principle, the matching principle, and the full disclosure principle. These principles do not
all apply specifically to the income statement, however they do apply to other forms of
financial reporting. The following of these principles in other financial statements does
affect the income statement, however. Following all of the assumptions and principles of
GAAP will ensure that income information is accurate.
The standard setup for an income statement under GAAP includes a heading that lists the
name of the company, the type of financial statement being presented, followed by the date
