Statement of Activity (Income Statement)

The Statement of Activity, also called the Income Statement, lists the current totals for all income and expense accounts during a particular time period.

Income accounts usually have a credit balance, and are increased with credits and decreased with debits. Expense accounts usually have a debit balance, and are increased with debits and decreased with credits. This is true even if an expense account balance is zero at the beginning of each fiscal year.
Note: A fiscal year is any consecutive 12-month period used for accounting or reporting purposes. Many use the calendar year, while others prefer July 1 to June 30.

At year-end, the expense accounts are subtracted from the income accounts, which calculate the net profit/loss. The income and expense accounts are then reset to zero for the next year.

The Income Statement can have several columns. Usually, the current monthly totals are in the first column, the year-to-date totals in the second, budget amounts in the third and fourth, and last year's totals in the fifth and sixth columns. Additional columns can show the variance between years or the difference between the budget and current totals.

Accounting Equations and Terms

Net Profit/Loss (on Income Statement)= Total Income - Expenses
Assets= Liabilities + Equity