ACCOUNTING Income Statement Income Statement income statement a

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 $Calculate 6 790 Net $ 3 110 Income/Loss

Income Statement Equations Income statement equation for a service business. Revenue – Expenses = Net Income statement equation for a retail business. Revenue – Cost of Goods Sold = 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