1. Professor Eric Carstensen
The Income Statement
Professor Eric Carstensen
MiraCosta College

2. The Income Statement
Also known as Profit & Loss (P&L), Statement of Financial Performance, Revenue Statement – it depends on management preference and that of the external users.
We will explore different formats for both service and merchandising companies.

3. Income Statement for Service Business – Chart of Accounts Order for Expenses
Revenues
$ 12,400
Rent Expense
3,000
Wages Expense
4,000
Supplies Expense
600
Insurance Expense
400
Interest Expense 50
Deprec Expense - Equip
100
Total Expenses
8,150
Net Income
$ 4,250

4. Income Statement for Service Business – Sorted by Expense Amount
Revenues
$ 12,400
Wages Expense
4,000
Rent Expense
3,000
Supplies Expense
600
Insurance Expense
400
Deprec Expense - Equip
100
Interest Expense 50
Total Expenses
8,150
Net Income
$ 4,250

5. Income Statement for Service Business – Expenses Sorted Alphabetically
Revenues
$ 12,400
Deprec Expense - Equip
100
Insurance Expense
400
Interest Expense 50
Rent Expense
3,000
Supplies Expense
600
Wages Expense
4,000
Total Expenses
8,150
Net Income
$ 4,250

6. Merchandising Income Statement
Sales
$ 25,600
less: Sales Discounts
1,200
less: Sales Returns & Allowances
800
Net Sales
$ 24,400
Cost of Goods Sold
12,300
Gross Margin
$ 12,100
Wages Expense
4,000
Rent Expense
3,000
Supplies Expense
600
Insurance Expense
400
Deprec Expense - Equip
200
Interest Expense 50
Total Expenses
8,250
Net Income
$ 3,850

7. Single Step Income Statements
Service Business
Merchandising Business
Revenues
$ 12,400
Net Sales
$ 24,400
Operating Expenses
8,150
Cost of Goods Sold
12,300
Net Income
$ 4,250
Gross Margin
$ 12,100
8,250
$ 3,850

8. Multi Step Income Statement
Sales
$ 385,900
less: Sales Discounts
5,200
less: Sales Returns & Allowances
2,800
Net Sales
$ 380,700
Cost of Goods Sold
156,100
Gross Margin
$ 224,600
Operating Expenses
Selling Expenses
Sales Salaries
54,200
Advertising Expense
20,300
Sales Supplies Expense
3,600
Deprec Expense - Sales Equip
2,700
Total Selling Expenses
80,800
General & Administrative Expenses
Administrative Salaries
63,900
Office Supplies Expense
2,500
Insurance Expense
10,400
Deprec Expense - Equip
3,100
Total General & Admin Expenses
79,900
160,700
Operating Income
Other Income & Expense
Interest Income
7,800
Interest Expense
4,500
Gain on Disposal of Equipment
2,200
Total Other Income & Expense
5,500
Income Before Taxes
69,400
Incxome Taxes
23,800
Net Income
$ 45,600

9. Statement of Retained Earnings
Beginning Balance $
Net Income
4,250
Dividends
(1,000)
Increase (Decrease)
3,250
Ending Balance
$ 3,250

10. Income Statement - Concluded
In this presentation, we looked at different types and formats of the Income Statement and finally, where the last line on the statement – Net Income – goes next.
There is a similar presentation on the Balance Sheet and one covering the Statement of Cash Flows.