Condensed Income Statement
A condensed income statement is a summarized version of a company’s full income statement, presenting the essential financial information in a simplified format. The primary purpose of a condensed income statement is to provide a quick and easy-to-understand overview of a company’s financial performance over a specific period, usually a quarter or a year. It includes key elements of a regular income statement, such as revenues, expenses, and net income, but with fewer line items and less detail.
A condensed income statement typically consists of the following sections:
- Revenues: This section shows the total revenues generated by the company during the reporting period. In a condensed income statement, revenues may be presented as a single line item, without a detailed breakdown of various revenue sources.
- Cost of goods sold (COGS): This section represents the direct costs associated with producing or providing the goods or services sold by the company. In a condensed income statement, COGS may be presented as a single line item, without detailed information about specific cost components.
- Gross profit: This is the difference between revenues and cost of goods sold. Gross profit represents the amount of money available to cover operating expenses and generate a profit.
- Operating expenses: This section includes the indirect costs associated with running the business, such as selling, general and administrative expenses. In a condensed income statement, operating expenses may be presented as a single line item or a few line items, without a detailed breakdown of specific expense categories.
- Net income (or net loss): This is the bottom line of the income statement, representing the company’s profit or loss for the reporting period. Net income is calculated by subtracting all expenses, including taxes and interest, from total revenues.
A condensed income statement can be useful for various stakeholders, including investors, creditors, and management, as it provides a high-level view of a company’s financial performance. However, it’s important to note that a condensed income statement may not provide sufficient detail for a comprehensive financial analysis. In such cases, a full income statement with detailed line items and accompanying financial statements would be necessary for a thorough evaluation.
Example of a Condensed Income Statement
Let’s consider a hypothetical example of a condensed income statement for ABC Company for the quarter ended March 31, 2023.
ABC Company
Condensed Income Statement
For the quarter ended March 31, 2023
Revenues: $120,000
Cost of goods sold (COGS): ($80,000)
Gross Profit: $40,000
Operating expenses:
Selling, general and administrative expenses: ($25,000)
Research and development expenses: ($5,000)
Total Operating Expenses: ($30,000)
Operating Income: $10,000
Interest Expense: ($2,000)
Income before Taxes: $8,000
Income Tax Expense: ($2,400)
Net Income: $5,600
This condensed income statement for ABC Company provides a simplified overview of the company’s financial performance for the quarter ended March 31, 2023. It includes key elements, such as revenues, cost of goods sold, gross profit, operating expenses, and net income, but with fewer line items than a full income statement. The condensed format allows stakeholders to quickly assess the company’s financial performance during the reporting period. However, for a more in-depth analysis, a full income statement with detailed line items and accompanying financial statements would be required.
