La Touche Cosmetics operates in a very competitive market. Every year, the company accountants prepare an income statement for the business. These accounts are examined very closely by the company’s management team and shareholders who want to see how the business is performing.
1. What are the fi nal accounts of a business? All organisations, whether commercial or non-commercial, need to keep fi nancial records of their transactions to ensure that they have enough money to pay their expenses. At the end of the year, a business will summarise its fi nancial performance using an income statement and a statement of fi nancial position. These accounts show how much money the business is making (or losing) and how much the business is worth. Together, they are known as the Final Accounts of a business.
2. What is an income statement? An income statement shows the amount of income earned, expenses incurred and profi t made by a business over a certain period of time.
Businesses like La Touche Cosmetics must prepare this account annually. Sometimes they prepare it more than once a year. An income statement consists of three parts: 1 The Trading Account 2 The Profi t and Loss account 3 The Appropriation Account
