ACCOUNTING 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)

Mark’s Repair Shop Income Statement For the month ending September 30, 20__ Revenue Repairs Revenue$ Total Revenue $ Expenses Salaries$ Rent Advertising 850 Supplies 185 Utilities 235 Insurance 150 Delivery Expense 770 Total Expenses $ Net Income $ Step 1 Statement Headings Step 2 Organize Revenue Section Step 3 Organize Expenses Section Step 4 Calculate Net 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, Select the necessary accounts from the ones listed below: Cash$ Sales$ Accounts Receivable633.00Insurance Laundry Supplies651.00Miscellaneous Expenses Machinery & Equipment Rent Trucks Telephone Accounts Payable Truck Repairs Bank Loan Utilities Expense A.Ottawa, Equity Wages