A comparative income statement is used to track a business’s progress over time, with columns for each income period and multiple rows for different sources of income. Gross income is listed first, followed by operating expenses, and net income is calculated. Analysts use this information to identify potential problems and bottlenecks in operations.
When a business wants to get a view of how the business is progressing or regressing over a period of time, a comparative income statement is often used as a starting point to get the big picture or help identify potential problems. The comparative income statement is prepared with several columns on the page, identifying each income period. Using this format allows the analyst to see historical trends in revenue over the various periods identified in the columns. Multiple rows are also often included to specify different sources of income. Together, the rows and columns provide the business analyst with a big picture of the overall business performance and the performance of individual revenue streams.
For presentation purposes, the columns in a comparative income statement are generally arranged in a chronological order beginning with the most recent time period. So the most recent time period will be in the column right next to the rows that list the types of income. Each previous time period is listed in regression on the right of the page. For example, the list for June, July, and August would demonstrate a multi-month display using this format.
Less common is the opposite format where time periods are specified in reverse. Listed right next to the rows indicating income, the furthest time period is specified. Thereafter, moving forward in time to the most recent period at the end of the statement, each additional time period is listed. As an example, such time periods would be on the order of March, February and January. However, with readability in mind, this format is not frequently used as it does not easily articulate the current state of revenue, which is often a concern for the analyst.
Gross income is usually listed first on the comparative income statement, which is typically one page long. On the next page, all operating expenses are generally deducted from the time period specified in each column. Total operating expenses are generally listed for each time period and subtracted from gross income to show total net income from all sources.
Business analysts find this information in the comparative income statement just as important in the gross income trend. If gross income, for example, shows progressive growth, but net income shows regression, this probably indicates a bottleneck in operations that will manifest itself in operating expenses. By analyzing operating expenses, an analyst can identify from period to period where this bottleneck is likely to occur and use that information to determine what other reports might be relevant to identifying the problem and fixing it.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
