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1. Income Statement
Introduction
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2. How do you manage your revenues and expenses?
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Earn a salary and possibly commission
Pay rent or a mortgage
Pay for transportation, food, and entertainment
Pay taxes
– Some expenses are tax deductible (i.e. interest on mortgage) while some are not (i.e. dinner at a restaurant)
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3. Companies manage their revenues and expenses similarly
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Earn revenues from core and affiliate businesses
Pay for the raw materials needed to create finished products
Pay for general and administrative expenses such as salary to employees
Pay interest on money borrowed
Pay taxes
– Some items are tax deductible (i.e. interest on debt) while others aren’t (repaying borrowed money)
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4. Company’s Income Statement
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Revenues and expenses over a period of time (1 year, 1 quarter, etc.)
From total sales to net income
Transactions taking place during the income statement’s period of time are included, regardless of whether cash
is exchanged immediately
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5. Income Statements ‐ Meaning
Financial Statement which provide information about the financial performance of the company is called as Income
Statement or Profit & Loss statement or Statement of earnings or Statement of Operations
Revenue
Expenses
1.
Sales of goods
1. Purchase of goods
2.
Commission received
2. Manufacturing
3.
Gain on sale of investment
3. Administrative
4.
Other incomes
4. Selling & Distribution
5.
Income from Services
5. Depreciation
6. Finance exp
7. Loss on sale of investment
It is always calculated for a specified PERIOD
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6. Presentation Format
Income Statement
Sales
(Less)
COGS
Gross Profit
Operating Profit
(Less)
(Less)
(Less)
Selling Exp
Administrative Exp
General Exp
EBITDA
(Less)
Depreciation
EBIT
(Less)
Interest
EBT
(Less)
Income Tax
Net Income
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7. Thank You !
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