Overview
This report provides a detailed summary of your business income and expenses. If the cost of goods sold has been assigned to a tax line item, it will be included in the report. The report also displays your net income at the bottom, giving you a clear view of your business's financial performance for the selected period.
Unlike transaction-based reports, the Business Income Statement uses invoice and business accounting data to determine income, which can sometimes lead to confusion when reviewing client payments.
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How the Business Income Statement Calculates Income
Income is calculated from:
Invoice line items.
Products and Services assigned to those line items.
The income categories associated with those Products and Services.
Using Products and Services on Invoices
To ensure income appears correctly on the Business Income Statement:
Create a Product or Service.
Assign it to a business income category.
Add the Product or Service to invoice line items.
Record payment when the invoice is paid.
When the invoice is included in the reporting period, the associated income category will appear in the report.
Cash vs. Accrual Reporting
The Business Income Statement can be run using either Cash or Accrual accounting methods.
Cash Basis
Under Cash Basis accounting:
Income is generally recognized when payment is received.
Unapplied Client Payments may appear as Client Credit because payment has been received but not applied to an invoice.
Accrual Basis
Under Accrual Basis accounting:
Income is recognized when it is earned through invoicing.
Unapplied Client Payments do not appear as income because they have not yet been associated with earned revenue.
Frequently Asked Questions
My invoice was paid, but I don't see revenue in the report.
Verify that:
The invoice falls within the report's date range.
The invoice contains Products or Services linked to business income categories.
The report is being run using the appropriate accounting method (Cash or Accrual).
Where should service-based businesses categorize income?
For service businesses, it is recommended to create a Product or Service for each type of work performed and assign it to the appropriate income category. This allows revenue to be properly classified and reported on the Business Income Statement.
I can see Client Payments in my register. Why aren't they in the Business Income Statement?
The report is designed to display revenue categories tied to invoice line items rather than payment transactions. Client Payments indicate that an invoice was paid, but they are not treated as income categories.
