Module 3 Discussion

An income statement is a summary of revenues and expenses and gains and losses, ending with net income for a specific period of time. Indicate the two traditional formats for presenting the income statement. Which of these formats is preferable for analysis? Why?

When you respond to this discussion question, I expect to see a brief discussion on the importance of the income statement. After which, you need to respond to the other requirements completely.
The income statement of any company is often considered the most important reporting tool. The income statement shows revenues, expenses, gains, and losses. It gives the users of financial information a snap shot view, at any specific point in time, the profitability of the company. If the net amount of revenues and gains minus expenses and losses is positive, the bottom line of the profit and loss statement is labeled as net income. If the net amount (or bottom line) is negative, there is a net loss.
According to Averkamp in an article in Accounting Coach, he states that, “People pay attention to the profitability of a company for many reasons. For example, if a company was not able to operate profitably—the bottom line of the income statement indicates a net loss—a banker/lender/creditor may be hesitant to extend additional credit to the company. On the other hand, a company that has operated profitably—the bottom line of the income statement indicates a net income—demonstrated its ability to use borrowed and invested funds in a successful manner. A company's ability to operate profitably is important to current lenders and investors, potential lenders and investors, company management, competitors, government agencies, labor unions, and others” (Averkamp, 2015).
There are two traditional styles of formats used for presenting the income statement. A company may prepare its income