Earnings are basically the net profits of a company’s operation over a period. Earnings per share (EPS) is the number on which corporation tax is based. The concept of earnings has a slightly different legal meaning in Canada than it does elsewhere in the world. For a detailed explanation of certain aspects of corporate operations many other technical terms are often used as EBITDA and EBIT.
Net earnings refers to the total profit realized from the operating expenses less principal paid in capital. There can be no profit or loss, as there is in the case of an investment or gift. The term ‘net’ refers to the entire value not just the income or gain, i.e. net income not the gross profit. Dividends are paid by shareholders to the Board of Directors as a proportion of net earnings.
All corporate events are reported under the statement of earnings and are usually prepared in the same way as the profit and loss account. The statement of earnings includes all types of receipts including cheques, cash payments, property lease payments etc. It does not include net income and the statement of equity. The income statement indicates net income from continuing operations less cost of goods sold and whether the company receives any dividends. The income statement thus gives a picture of how a company earns or loses money.