Continuing the series on the personal financial statements, we are going to look at the Income Statement. A corporate income statement is laid out with these major figures. The statement on the right is from Google Finance's view of Research in Motion, maker of the Blackberry.
- Revenue/Gross Profit – Cash brought in and direct costs
- Operating Income – Income after expenses
- Net Income – Income after all expenses including taxes and interest
So, what does that translate to for us? Here is a personal income statement based on a hypothetical situation. This is made up for educational purposes:
I am such a great guy I made that spreadsheet public here: Google Docs.
So, a net income is what you keep after everything you earn and spend. Your net income rolls into your balance sheet as cash or assets.
There is not right or wrong net income. There is only one rule, IT HAS TO BE GREATER THAN ZERO! The bigger the better. You should put that net income into savings or retirement. You could even put savings as a category under expenses or a deduction of income in the revenue section.
If you have any questions about preparing your personal income statement, please let me know in the comments.
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