An income statement is basically the same for people and for business. In our personal lives we have income which is derived from a salary, of from other sources such as earning from a small business, alimony, disability and other sources. In business the
income is derived from the sale of a service or a product. In our personal lives we have expenses, rent or mortgage payments, utilities, food, entertainment, gas for the car etc. Businesses also have expenses that are quite similar. They have rent on offices,
utilities, travel and entertainment etc. The only difference is that they may have more types of expenses such as what is called "cost of product" these are cost directly related to the sale of a product or service.
Understanding an income statement whether personal or business is not as complex as you may think. It is comprised of incoming funds out outgoing funds. There are a few wrinkles in the way that things are handled in business different from personal...
If you are just starting beginning your studies in accounting, don't worry. It isn't really as hard as you might thing. Actually, you do accounting in your every day life, day in and day out. You deal with Assets, Liabilities, and Equity, the 3 components
of the balance sheet.
For instance, when you get your paycheck, or your direct deposit into your bank account, you now have more cash available to you then you had before you got paid. You increased your assets. Cash is the number one asset in both business and personal life.
Why - because it is the most liquid. It is the thing that is easiest to exchange for something else of value such as clothes, or food, or movie tickets. So - cash is an asset. What else is an asset? Do you own a car? If you do, then that is an asset. Less
liquid than cash and harder to exchange for other items, but still an asset because you could sell it and then use the cash to buy something else, or you could trade it in for another car.