Structure of the Income Statement Income statements are designed with various levels of complexity. The more complex the business under consideration, the more likely it will be necessary to employ a more complex or detailed income statement. Regardless of the level of complexity, provisions must be made in the statement to account for all expenses and receipts, whether cash or accrued. The time period usually covered by an income statement is the 12-month period corresponding to the accounting period of the farm. The calendar year is the most common accounting period for farms.
Profitability is considered the single best measure of financial performance of the farm.
Consequently, an income statement is sometimes called a profit and loss statement. An income statement does not measure performance relative to other objectives such as prestige, growth in acreage, and minimization of risk, or other non-monetary goals of the farm manager. The income statement measures the flow of all outputs and inputs for the period. Fixed and variable costs, changes in inventories and noncash items are all considered. In the case of any business using the owner's labor and capital, there are important practical complications associated with the measurement of flows of service from owned resources.