Income statement

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Income statement

  1. 1. Income Statement
  2. 2.  report prepared outside the ledger for presentation to interested parties detailing the various revenues and expenses for a period and calculating the resultant profit or loss
  3. 3.  is not part of the double-entry process contains information that can be classified for enhanced understandability ie items are classified as revenues, expenses etc is prepared at any time
  4. 4. Gross Profit Gross Profit/Loss is calculated in the Income Statement Gross Profit represents the profit generated by the business from the sale of goods/services. (ie Net Sales – COGS) Important to determine Gross profit/loss because the buying and selling of goods is the main form of revenue raising for business If Gross profit is insufficient business may struggle to cover remaining overheads and measures must be put in place
  5. 5. Improving Gross Profit Increase selling price of stock Improve/modify marketing techniques Reduce cost of goods sold: - investigate alternative suppliers - take advantage of discounts
  6. 6. Net Profit Remaining revenues are added to Gross Profit Expenses are then deducted to determine net profit/loss Net profit indicates the likely return to the owner Net profit is dependant upon the effectiveness of management to minimise remaining overheads
  7. 7. J Thomas Income Statement for year ended 30 June 2004Sales 10 000Less Sales Returns 500 9 500Less Cost of Goods Sold 2 100GROSS PROFIT 7 400Add Other RevenueCommission revenue 100Rent revenue 100 680 6 720Less Other ExpensesSales wages 1 000Insurance 3 200Discount Expense 1 500 5 700Net Profit $1 020

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