What an income statement covers
Revenue and expenses over a period — typically the corporation's fiscal year — ending in a single bottom-line result: net income, or net loss if expenses exceeded revenue for the period.
Gross vs net, defined precisely
Gross revenue (or gross income) is total sales or billings before anything at all is subtracted. Gross profit, sometimes shown as its own subtotal, is revenue minus the direct cost of producing what was sold. Net income is what remains after every operating expense is subtracted from there — and it's this net figure, not gross revenue, that flows through to the T1 or T2 and becomes the starting point for a mortgage file's income.
Why the gap matters to an underwriter
A business billing $400,000 a year and a business billing $120,000 a year can post identical net income if the first has much higher costs of doing business. Gross revenue on its own says almost nothing about what a business can actually afford to pay its owner — which is exactly why quoting a client's "business does $400,000 a year" figure, without net income behind it, tells an underwriter close to nothing useful.
Where add-backs and gross-ups plug in
Once net income is established from this statement, Course 03's modules on add-backs and gross-ups explain which expenses inside that net figure get added back for lending purposes. That's a lending decision, made on top of the net income this module teaches you to find — which is why it lives there, not here.
A worked read-through
A simple income statement might show revenue of $185,000, total expenses of $142,000, and net income of $43,000 as the final line. The $185,000 is gross revenue; the $43,000 net income figure — not the $185,000 — is the number a lender starts from, before any Course 03 adjustments are layered on top of it.
