The Income Statement or Statement of Operations

The Statement of Operations in a not-for-profit organization is also called the Income Statement in for-profit organizations. It summarizes the organization’s revenue, expenses, and the excess of revenues over expenses (also called income before taxes in a for-profit organization).[1]

The relationship of the statement of operations to the balance sheet can be best explained by the following equation:

  • Assets = Liabilities + Net Assets + (Net Expenses – Expenses)
    • Where permanent accounts of the balance sheet—that carry forward balances to the next year—relate to the temporary accounts of the statement of operations—which are the accounts that zero out at the end of each year
Term Definition Section Info
Bad Debt Expense The exact uncollectible amount from customer accounts Included in revenues
Charity Care Reflects services the organization provided with no expectation of payment Included in revenues
Amortization Allocation of the costs of intangible assets over their useful economic lives Included in expenses
Depreciation Process of allocating the costs of a tangible asset over the asset's economic life Included in expenses
Expense Cost associated with providing goods or services
Gross Patient Services Revenue Total amount of charges for patients utilizing the organization, regardless of the amount actually paid Included in revenues
Interest Expense incurred with borrowed money Included in expenses
Net Income When revenues and gains are greater than expenses and losses
Net Patient Services Revenue Money generated by providing patient care minus the amount the organization will not collect as a result of discounting charges per contractual agreement and providing charity care Included in revenues
Non-Operating Income Money earned from non-patient care services, such as investment income
Operating Expenses Daily operational costs not associated with the direct selling of products or services Included in expenses
Operating Income Money earned from providing patient care services and includes total revenue, gains, and other support minus the total operating expenses
Other Operating Expenses Miscellaneous expenses that have not been reported elsewhere Included in expenses
Other Operating Revenue Money generated from services other than services to patients and enrollees which includes money from rental equipment and office space, sales of supplies and pharmaceuticals, cafeteria and gift shop sales, etc. Included in revenues
Premium Revenue Money generated from Capitation arrangements that must be reported separately from patient services revenue because it is not dependent on care being delivered Included in revenues
Revenue Inflows or other enhancements of assets of an entity from its operations

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  1. Nowicki, M. (2017). Introduction to the financial management of healthcare organizations (7th ed.). Health Administration Press.


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