What is an Earnings Statement?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 31 May 2020
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An earnings statement is a document which shows how much a person or a company earned during a set period. In the case of companies, earnings statements are usually issued every quarter so that investors can monitor the health of the company, and they are also known as income statements or profit and loss statements. For individuals, earnings statements classically accompany paychecks, showing employees how much money they made, and how much was deducted. In both cases, the document is designed to be as clear and as open as possible so that people understand how a company arrived at net income or pay, given the original gross income or pay.

In a company earnings statement, the document includes the gross intake, along with all of the expenses carried by the company during the period covered by the statement. The bottom line of the statement shows the net profit, the amount of money which the company actually earned after all of its expenses. Expenses can vary from basic overhead costs to the cost of a new acquisition, and shareholders are usually interested in the amount of expenses because they can indicate whether or not the company is being run responsibly.

A personal earnings statement like that seen in a paycheck will provide basic information about how many hours someone worked and at what rate, and it will list the deductions for company health insurance, taxes, retirement accounts, and so forth. Many earnings statements also show employees how many sick and vacation days they have accrued. The bottom line of this statement shows the net or take home pay which the employee is entitled to after all of the deductions.

In the United States, people can also receive earnings statements from the Social Security Administration. These statements show how much someone earned over the course of his or her lifetime, and how much was paid into Social Security. Depending on the amount paid in, the person will be entitled to varying amounts of Social Security pay every month. These documents are commonly mailed out at retirement age, although people can request a copy of their earnings statements at any time from the Social Security Administration.

It is important to review an earnings statement carefully, whether it involves a company's income or an individual's. People should look for obvious errors or discrepancies which suggest problems with bookkeeping, and in the case of personal statements, they should bring such errors on an earnings statement to the attention of the accounting department. For example, someone may note that he or she worked overtime but did not receive overtime pay, or that an improper amount was deducted for a company-sponsored retirement plan.

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