The Income Statement Learning Outcomes 1 Understand Income

The Income Statement Learning Outcomes: 1. Understand Income Statement. 2. Understand the difference between balance sheet and Income statement.

Unit 2 - The Income Statement The balance sheet expresses the basic worth of a company. In contrast, the income statement shows the difference between the money paid out and the money taken in at a particular time. The equation used is : Net profit = Income – costs (overhead)

Equation’s terms q. Net profit: is the total income less the overhead. q. Income: is the total of all monies coming in , whether for goods sold or services provided. q. Costs: are the amount of money being paid out of the business at any one time. Ø The income statement could be prepared for a month, a quarter, or a year.

Example 1: Mustafa is a private investigator. In June, he prepared an income statement. He had income of $4, 500 (for investigative services) and $2, 400 (for surveillance services). He paid $2, 200 for rent of his office. $150 in insurance, $350 in utilities, and $450 in incidentals (advertising, hotel rooms, and so on ). What dose his income statement look like. Revenues Investigations: $ 4, 500 Surveillance: $ 2, 400 Total revenues: $ 6, 900 Rent: $ 2, 200 Insurance: $ 150 Utilities: $ 350 Incidentals: $ 450 Total expenses: $ 3, 150 Expenses: Net profit = $6, 900 - $3, 150= $3, 750

Example 2: Laila owns a 15 -unit apartment building. For the four quarter, she wrote up an income statement. She had rental income of $18, 500. she paid $9, 200 mortgage on the building, $1506 in insurance, $1, 050 in utilities, and $930 in building repairs. what does her income statement look like? Revenues: Rental income: $18, 500 Total revenues: $18, 500 Mortgage : $9, 200 Insurance: $1, 506 Utilities: $1, 050 Building repairs: $930 Total expenses: $ 12, 686 Expenses: Net profit =$18, 500 - $12, 686 = $5, 800

Example 3: Ahmad runs soda shop. He wrote up an income statement for last month. he pays $2520 rent on his shop, he paid $243 in insurance, $737 in utilities, $3250 in wages to his workers, and $1052 for supplies (ice cream, soda, hamburgers, and so on). His gross receipts last month were $9546 , what does the Soda Shop’s income statement look like? Revenues: Gross receipt: $ 9, 546 Total revenues: $ 9, 546 Rent: $ 2, 520 Insurance: $ 243 Utilities: $ 737 Wages: $ 3, 250 Supplies: $ 1, 052 Total expenses: $ 7, 802 Expenses: Net profit = $9, 546 - $7, 802=$1, 744