#BookkeepingTip: Income Statements...Easy as 1 2 3
Before I was a bookkeeper & money coach I was a VA and I was totally CLUELESS about bookkeeping.
I'll never forget the first time I tried to look at my Income Statement and feeling like a total goob. I didn't even know what an Income Statement was much less how to read one.
At the time I only sold my services, so when I saw services and product sales under revenue with roughly the same amount in each...I nearly had a panic attack!
How could that be?! I don't sell products!! What is this?
What I didn't realize and NEVER figured out until I took a course in bookkeeping was that I had simply marked the wrong revenue account on an invoice. When I duplicated that invoice over and over again, that money kept going in the wrong account. That's neither here nor there...I'm rambling 😬
Here's the point: I don't want you to look at your Income Statement, freak out, and click away before you get a chance to understand what's on there.
So in my simplest explanation possible, your Income Statement will show you three things.
1) How much you made.
This will either be called Revenue or Income and might even be split out underneath if you have different income streams like coaching and courses.
2) How much you spent.
This is called your Expenses. Your expenses will be broken out into different categories called expense accounts. For example, it's easier for you to understand where your money is if you have separate accounts for internet, website, and advertising instead of having them all lumped together.
3) What was left over.
This is called your Net Income. This is your income - expenses. Many people think of this as their profit, but if you are a sole proprietor or LLC you need to remember that your pay and taxes have not been taken out of this.
So if you only have $50 net income, you're in the black, but 😩 you're probably not getting paid much this month!