From Susan Ward,
Your Guide to Small Business: Canada.
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The Income Statement is one of the three financial statements that you need to include in the Financial Plan section of the business plan.

The Income Statement shows your Revenues, Expenses, and Profit for a particular period. It's a snapshot of your business that shows whether or not your business is profitable at that point in time; Revenue - Expenses = Profit/Loss.

While established businesses normally produce an Income Statement each fiscal quarter, or even once each fiscal year, for the purposes of the business plan, an Income Statement should be generated more frequently - monthly for the first year.

Here's an Income Statement template for a service-based business. It's followed by an explanation of how to adapt this Income Statement template to a product-based business.

YOUR BUSINESS NAME

Income Statement for the year ending _____________

(Row listing each month)

REVENUE

REVENUE: Services
Service 1
Service 2
Service 3
TOTAL REVENUE: Services

REVENUE: Miscellaneous
Bank Interest
TOTAL REVENUE: MISCELLANEOUS

TOTAL REVENUE

EXPENSES

DIRECT COSTS
Materials
Equipment Rentals
Salary (Owner)
Wages
EI Expense
CPP Expense
WCB Expense
TOTAL DIRECT COSTS

GENERAL AND ADMINISTRATION
Accounting and Legal Fees
Advertising and Promotion
Bad Debts
Bank Charges
Depreciation and Amortization
Insurance
Interest
Office Rent
Telephone
Utilities
Credit Card Commissions
Credit Card Charges
TOTAL GENERAL AND ADMINISTRATION

TOTAL EXPENSES

NET INCOME BEFORE INCOME TAXES

INCOME TAXES

NET INCOME

Not all of the categories in this Income Statement will apply to your business. Leave out those that don't apply and add categories where necessary to adapt this template to your business.

To use this template as part of the business plan, you'll need to set it up as a table and fill in the appropriate figures for each month (as indicated by the line "row listing each month"). There are links to two excellent examples of Income Statements provided by the Royal Bank in the sidebar of this article.

If you have a product-based business, the Revenue section of the Income Statement will look different. Revenue will be called Sales, and inventory needs to be accounted for. For instance, if you look at the Royal Bank's example of an Income Statement for Kamiko's Fine Foods, you'll see the Revenue section of the Income Statement described as:

SALES

COST OF SALES
OPENING INVENTORY
PURCHASES
ENDING INVENTORY
GROSS PROFIT

The Expense portion of the Income Statement, however, is very similar to the template I've provided above.

Ready to move on to the next financial statement that you need to include in the Financial Plan section of your business plan? The Cash Flow Projection is next.