An income statement tells us a great deal about the performance of a company over the past year. For example study of the income statement make clear the types and amount of revenge earned and expense incurred as well as the amount of gross profit and net income. Bet can we expect the income statement for the next year to indicate about the same level of performance? If the transaction summarized in the income statement for the year just completed were of a normal recurring other nature, such as selling merchandise, paying employees, and incurring other normal expense, we can reasonably assure that the operating result were typical and that somewhat similar result can be expected in the following year.
