Let's suppose Andy and Nick earned $2,500 mowing, trimming, and fertilizing lawns during the month of June. Most of their customers paid in cash, but one customer still owes them $50. They spent $100 on rakes, gloves, and ear protectors, which we're calling small tools and supplies. They spent $500 on gasoline purchases, $600 on fertilizer, and $30 on flyers advertising their business.

So for the month of June, the A & N Lawn Care income statement would look like this. Several things are important to notice. First of all, again we have the heading, which includes the name of the company and the title of the statement. For the date on the income statement, the date is stated differently than it is on the balance sheet. Notice that it says for the month ending June 30 20xx. This is because this income statement shows income for a particular period of time that has a beginning and an ending date. We started June 1, and we end at June 30. So the income statement covers a specific period of time.

The balance sheet, on the other hand, as we said before, indicates financial information at a particular point in time. And it is an accumulation of information. The income statement is only information from a beginning date to an ending date. On the income statement, we will see revenues and expenses. The specific revenues and expenses vary from one company to another.

A & N Lawn Care provides services. So our revenues in this company are called service revenues. And this is the $2,500 they earned from their customers during June. In contrast, a company that sells goods typically shows sales revenue instead of service revenue. So sales revenue is another type of revenue that you might see on another type of income statement. Also notice that A & N Lawn Care lists each of its expenses separately. We had the advertising flyers, which were $30; the small tools and supplies, which were the gloves, et cetera, for $100; their gasoline or fuel costs $500; and their fertilizer was $600.

Larger companies combine their expenses into general categories, such as selling expenses or general and administrative expenses. And you'll see that on some of the other financial statements that we'll cover in this course. Yeah, Andy and Nick provided this $2,500 worth of services to their customers during June. Under GAAP guidelines, the income statement reports all the revenues they earned. And it doesn't matter when they got paid.

So notice I said earlier that there was a $50 payment owed from a customer, but that $50 is included in this $2,500 because they actually earned the revenues. You'll also notice, after looking at the expenses that are listed, that income tax is not listed as an expense. Most companies that we're going to be talking about in this course do have income taxes because they will be corporations. For Andy and Nick, they do not need to list income tax as an expense because they're a partnership, and partnerships are taxed differently. So for Andy and Nick, no income tax.

The bottom line of the income statement, of course, is net income. And we have total net income of $1,270. That includes the revenues minus each of the four expenses that we list. Net income is called the bottom line because it is the last line on the income statement. It is a measure of the company's profit for the period, and it's an important metric for creditors and investors as they analyze the company's financial data.

Another frequently used term for net income is earnings. So net income, same thing as earnings. We'll use those terms interchangeably. This is called a single step income statement. Single step refers to-- and I'll abbreviate income statement IS. Single step refers to the fact that expenses are subtracted from revenues. And that's a one step calculation. So revenues minus expenses equals net income. And we will talk about multistep income statements at a later date.