Statement of Operations vs Income Statement Guide

What Is a Statement of Operations?

If you’ve ever wondered what is a statement of operations, here’s the simple answer. It’s a financial report that shows how much money a company earns and how much it spends. Many people also call it an income statement. But in some industries, especially nonprofits or government-funded organizations, it’s more common to call it a statement of operations.

Here’s what it usually includes:

• total money the company brings in
• all the costs and expenses
• final result, whether that’s profit or loss

It gives a snapshot of the business’s financial health over a certain time, like a quarter or a year. Think of it as a scorecard that shows how the company is doing financially.

Some companies release a consolidated statement of operations. That just means they combine results from several departments, branches, or business units into one report. It gives a full picture of the company as a whole.

People often ask, does the name really matter? The answer is yes, depending on the type of business. For-profit businesses usually use the term income statement because they focus on earning profit. Nonprofits, hospitals, and similar groups use the term statement of operations since they don’t sell products in the usual way.

So even if the format is the same, the name helps explain the purpose. The statement of operations shows whether an organization is using its money wisely, even if it’s not trying to make a profit.

Let’s take a quick example. A nonprofit hospital might publish a consolidated statement of operations every year. That report would include:

• donations
• grants and government funds
• insurance payments

It would also show expenses such as:

• staff salaries
• medical equipment
• facility costs

Since it’s consolidated, it includes all hospital locations, not just one. This helps everyone understand how the hospital is managing its money.

Common Line Items in a Statement of Operations

A statement of operations usually includes similar sections no matter what kind of business it is. The structure is simple and easy to follow.

Here are some common line items:

• operating revenue – the money earned from the main activities
• cost of goods sold – direct costs to make products or provide services
• operating expenses – regular costs like rent, payroll, and supplies
• operating income – what’s left after subtracting operating costs from revenue
• non-operating items – money from investments or one-time events
• net income or net loss – the final result after everything is added and subtracted

This report helps answer simple questions like:

• did the company make more than it spent?
• what are the biggest costs?
• were there any unusual profits or losses?

If it’s a consolidated statement of operations, it means you’re seeing numbers from the entire organization in one report. This gives a complete view of financial activity.

What Is an Income Statement

If you’re wondering what is an income statement, it’s a report that shows how a business earns and spends money. It helps you understand if the business is making a profit or taking a loss. 

Every company prepares it for a specific time—usually a month, a quarter, or a year. The numbers inside help owners, banks, and investors see how the business is doing. It’s one of the most used reports in accounting.

Some people use the term traditional income statement. That just means the basic version that has a common format: revenue at the top, expenses in the middle, and profit at the bottom. It’s simple and easy to follow. 

Even if you run a small business or are just learning, you can read one without much trouble. Once you know the parts, you’ll start to notice patterns and trends.

Why does the income statement matter? It tells you if your business is growing, shrinking, or staying flat. If sales are up but expenses are too, the profit may not change much. 

This report is also useful when applying for loans or looking for investors. People want to see proof that the business is working. And that proof often starts with the income statement.

So, how to prepare an income statement? Here’s what you usually do:

• write all the money you made during the period
• subtract the cost to make or deliver your product or service
• calculate the gross profit (sales minus direct costs)
• subtract business expenses like rent, wages, and supplies
• figure out if you made a profit or had a loss

That final number—your profit or loss—is the bottom line. It shows if your work paid off during that period. Every part of the report builds up to that number.

Structure and Components of an Income Statement

The traditional income statement follows a simple step-by-step format. Each part shows a different stage in how money flows through the business.

Here are the main parts you’ll usually see:

• revenue or sales – all the money the business earned
• cost of goods sold – the cost to produce or deliver the product or service
• gross profit – revenue minus the cost of goods sold
• operating expenses – costs like rent, marketing, and employee wages
• operating income – profit before other gains or losses
• other income or expenses – things like interest, taxes, or one-time events
• net income or net loss – the final result showing profit or loss

When learning how to prepare an income statement, these parts are where you start. Each line helps answer a different question about the business. Are you spending too much? Are your sales enough to cover costs? The income statement makes it easy to spot those answers.

Whether it’s for a large company or a one-person shop, this report is part of the financial basics. If you understand the income statement, you’re one step closer to understanding how business works.

Are the Statement of Operations and Income Statement the Same?

A common question in accounting is this: is the statement of operations the same as an income statement?

The short answer is yes—most of the time. Both reports show how much a business earns and spends during a set period. They also tell you whether the business made a profit or had a loss. But the name can change depending on the type of organization.

For example, nonprofit organizations often use the term statement of operations. This fits better with how they handle money. They don’t usually sell products, so the word “income” may not feel right.

Businesses that sell products or services use income statements more often. Even though the names are different, the report format is usually the same.

So, why does this matter? When reading reports from different companies, knowing the terms helps avoid confusion. A statement of operations might sound new, but it’s the same as the report you already know.

That’s why many people ask, is the statement of operations the same as an income statement—and it’s a good question.

Now let’s look at the difference between a consolidated statement of operations vs income statement.

A consolidated statement of operations shows results from more than one part of a business. For example, if a company owns three stores, this report includes all three together. It gives a full picture instead of breaking things into separate parts.

On the other hand, a regular income statement might only show one store or one business unit.

Here’s what makes a consolidated statement of operations different:

• it combines numbers from multiple branches or divisions
• it helps managers and investors see the company as a whole
• it can be used by both for-profit and nonprofit groups
• it still follows the same layout as a standard income statement
• it includes all revenue and all expenses in one report

So when comparing a consolidated statement of operations vs income statement, the main difference is in scope, not format.

The numbers tell the same story, just on a bigger scale. Whether you run one store or ten, these reports help track how the business is doing.

And once you understand the terms, the rest becomes much easier to follow.

Why the Terminology Matters in Financial Reporting

You might think the words don’t matter much. But in finance, they do. The terms you use can change how people understand the numbers.

Some say income statement, others say statement of operations. The reports look similar, but the name depends on the type of business.

• for-profit companies use income statement
• nonprofits or government groups use statement of operations
• consolidated statement of operations combines multiple units in one report
• terms help readers know what kind of business they’re looking at
• the wrong term can confuse investors, lenders, or board members

That’s why it’s not just about the numbers—it’s also about how they’re presented. The wrong label could lead to misunderstandings.

Let’s say you’re preparing a report for a nonprofit hospital. If you call it an income statement, some readers may question it. But if you use a statement of operations, it fits better with the nature of the organization.

The same goes for a consolidated statement of operations. If it includes all branches or business units, that should be clear from the name.

That’s where having the right partner makes a real difference. At Hundred MS, we understand these small but important details.

We don’t just prepare reports—we help businesses speak the right financial language. Our team knows when to use the right terms, formats, and structure.

• we work with nonprofits and for-profits alike
• we know what terms fit your business type
• we help you stay clear, accurate, and confident
• we bridge the gap between finance and business systems like NetSuite ERP

So yes, the words matter—especially when you’re telling your financial story. And with Hundred MS, that story will always be clear, correct, and understood.