ACCOUNTING
Income Statement
Income Statement
• income statement - a financial statement that
shows a business’s profit (or loss) over a
stated fiscal year.
• Required for income tax
• Helps answer what the Balance sheet does
not: How profitable is the business to the
owner?
• The money, or the promise of money,
received from the sale of goods or services is
called revenue.
• Expenses are expenditures that help a
business generate revenue. They have
already been paid (Liabilities have not!)
Four Steps to Creating an
Income Statement
1.Statement Heading – Who? What? When?
2.Organize the Revenue – all sources of
revenue should be listed
3.Organize the Expenses - all sources of
expenses – generally larger ones listed first
4.Calculate Net Income or Net Loss – Use
information from Steps #1 & 2 and the
equations for calculating Profit (Total
Revenue- Total Expenses = Net Income)
Step 1
Statement Headings
Mark’s Repair Shop
Income Statement
For the month ending September 30, 20__
Revenue
Repairs Revenue
Total Revenue
Expenses
Salaries
Rent
Advertising
Supplies
Utilities
Insurance
Delivery Expense
Total Expenses
Net Income
$
9 900
$
$
2 600
2 000
850
185
235
150
770
Step 2
Organize Revenue
Section
9 900
Step 3
Organize Expenses
Section
Step 4
6 790
Calculate Net
$
3 110
Income/Loss
$
Income Statement Equations
Income statement equation for a service business.
Revenue – Expenses = Net Income
Income statement equation for a retail business.
Revenue – Cost of Goods Sold = Gross Profit
Gross Profit – Expenses = Net Income
Income Statements for Retail
Businesses
• Income statement for retail businesses are
similar to those of service businesses.
However, retail businesses need to take the
cost of inventory (goods on hand to be sold)
into account.
Let’s Practice!!!
Using the following information, we’ll fill an income
statement in together:
• At the Edmunds Cafe, the following information is
available to look at the fiscal year ending December
31, 2014
• Revenues = $105,000
• Utilities = $556
• Salaries = $32,000
• Rent = $1,100
• Insurance = $320
Practice Question #3:
Prepare an income statement for the Markville Laundromat for the
fiscal year ending June 30, 2014. Select the necessary accounts
from the ones listed below:
Cash
$1212.70
Sales
Accounts Receivable
633.00
Insurance
Laundry Supplies
651.00
Miscellaneous Expenses
Machinery & Equipment
13900.00
Rent
Trucks
27050.00
Telephone
Accounts Payable
Bank Loan
A. Ottawa, Equity
1746.00
Truck Repairs
23000.00
Utilities Expense
21006.39
Wages
$88932.29
7171.00
225.00
22000.00
574.25
8146.90
907.64
49908.50