A personal income statement helps you analyze expenses and revenues over a period of time or at a given point in time. It can be an effective budgeting tool if used properly.
An income statement is also known a statement of profit and loss or statement of earnings. It indicates revenues earned and expenses incurred over a period of time.
A statement of earnings is important because it helps you gauge the amount of disposable income, or net income, available to invest in retirement accounts, plan a vacation or save for college education.
On a personal income statement, income represents salaries and bonuses you receive from a labor contract. If you own a small business, income reflects sales revenue.
A gain is income you earn from secondary activities. Examples include gains in financial market activities or on a sale of property. This also needs to be included.
An expense is a cost of living, such as a bill, or a charge you incur from borrowing activities. Examples include rent, utilities and mortgage interest.
Losses are expenses you incur from secondary activities. Examples include losses in financial market activities or on a sale of property.