Earnings Statement – What You Need To Know?
The standard of living and the list of basic requirements have drastically changed in the last decade. The cost of many things has risen due to several reasons and the common people have to keep a strict check on their budget and expenses. It has become important for every individual to keep their finances documented to ensure everything is up-to-date.
What is an Earnings Statement?
The earning statement is also known as the income statement or statement of earnings, or net income statement and contains detailed documentation regarding the money earned during the specific time period. The main outcome gives details about the net profit or loss gained during this period. The businesses issue the earning statement for the company to track their profitability. Meanwhile, the organization issues the earning statement for the employees along with their paychecks.
Why Your Statement of Earnings Is Important?
Finances are very important for any individual as well as for the companies. The earning statement gives the important details regarding their income, expenses, profits loss details, etc. This document helps the individual to track how much they earned and spent during the year and also includes a breakdown of any deductions if any.
Businesses rely on these earning statements as it helps them to summarize their revenue and expenses. It enables them to identify their profit and loss and use these details for evaluating their current strategies.
Components of Earnings Statement
The earning statement does not include any universal format but contains the approximately same information for the individual as well for the business. Thus it is easy to navigate and relate to several terms.
Employee’s Earnings Statement:
- Pay period: Length of time for which the employee is being paid for their work.
- Hours worked: It includes the number of hours of work performance. Not necessarily it means that the employee is paid on an hourly basis.
- Gross pay: It includes the total earnings during the pay period without including any taxes or deductions.
- Deductions: Money taken out from the gross pay for covering the taxes, benefits, garnishments, etc. It includes voluntary and involuntary deductions.
- Employer contributions: This includes the money contributed by the employer towards medicare, social security, retirement funds, or any other benefits.
- Net Pay: This includes the final amount remaining after making all the deductions and the amount that the employee takes home.
Company’s Earnings Statement:
- Time period: Includes the length of time covered in the statement of earnings.
- Revenue: It includes the breakdown of the total company’s revenue along with the operational and non-operational revenue.
- Gains: It includes the income generated by other activities like one-time sales of any asset or equipment apart from inventory.
- Expenses: It includes all the primary activity expenses like wages, utility costs, sales commissions, transportation expenses, etc. It also includes secondary expenses that are not directly related to the core business activities.
- Losses: Includes expenses accrued from loss-making sales, lawsuits, unusual costs, etc.
- Net income: It is calculated by adding together the gains and revenues and deducting the expenses and losses.
How You Should Read Your Earnings Statement?
The individual or the business should check the following points while reading their earning statement:
- Period beginning, period end, and pay date.
- Net pay and advice number.
- Tax status.
- Tax benefits and other deductions.
- Deposit information.
- Leave used.
- Taxable fringe benefits.
Every individual as well as the business needs to keep track and document details of their finances for a particular period. And, that can be done through the best pay stub maker. These details generated by a free paystub generator help in understanding the current financial status and planning future strategies.