Income Statement

Income Statement
The Income Statement shows the company’s profit
and loss over a period of time.

The income statement is also known as

the statement of income, statement of earnings,
statement of operations, profit and loss statement,
 Princess Beauty Shop HEADER
Statement of Financial Position
For the Period Ended December 31, 2015

Sales xxx
Less: Sales return and allowances xxx
Sales discounts xxx __xxx__
BODY
Net Sales xxx
Less: Cost of goods sold __xxx__
Gross Profit xxx
Less: Operating expense __xxx__
Net income (loss) xxx
Following major sections

•Income or revenue section

•Cost of goods sold

•Operating expense
 Income or Revenue Section

•Sales

•Sales Return And Allowances

•Sales Discounts
Revenue/Sales

Sales revenue is the income received by a

company from its sales of goods or the
provision of services.
Cost of Goods Sold Section

measures the “direct cost” incurred in the

production of any goods or services.

It includes material cost, direct labor cost,

and direct factory overheads, and is
directly proportional to revenue.
Gross profit
(sometimes referred to as the statement
of profit and loss)

It is calculated by subtracting Cost of Goods

Sold (or Cost of Sales) from Sales Revenue.
To illustrate:
As of December 31, 2018, ABC Bicycle company has sold 200
units for a total of $60,000 in sales revenue.

However, it has incurred $25,000 expenses both for spare parts

and materials as well as direct labor costs.

There were also returns and allowances for a total of $1,000.

Compute for the gross profit.
 ABC Bicycle Company
Statement of Financial Position
For the Period Ended December 31, 2018

Sales $ 60,000
Less: Sales return and allowances $1,000 1,000
Net Sales 59,000
Less: Cost of goods sold 25,000
Gross Profit $ 34, 000
 Operating Expense Section

This presents the different expenses incurred by the business

during the period.

•Salaries and wages

•Utilities
•Supplies
•Taxes and license
•Travelling
•Doubtful account
•Depreciation expense
•Gasoline and oil
Inventory Account

Inventory refers to goods that remain unsold

or unconsumed at the end of the accounting
period
3 Types of Inventory Account in Manufacturing Business

Raw materials inventory of raw materials that

were not used or consumed on December 31.

Work-in-process inventory of raw materials

that have not been started remained
unfinished on December 31.

Finished goods inventory of goods that have

been completed but remained unsold on
December 31
Net income is the amount of accounting profit a
company has left over after paying off all its
expenses.

Net income is the last line item on the income

statement proper.
ACTIVITY: Prepare Income Statement
 Modern Laundry Center
Trial Balance
December 31, 2016

Cash P 66 000
Accounts Receivable 80 000
Notes Receivable 20 000
Laundry Equipment 48 000
Office Furniture 28 000
Accounts Payable 38 000
Jenny Toledo, Capital 68 000
Laundry Service Income 175 300
Laundry Supplies Expense 11 800
Rent Expense 3 000
Salaries And Wages 16 000
Utilities Expense 3 500
Taxes And Licenses 5 000
Total P 281 300 P 281 300
 Modern Laundry Center
Income Statement
December 31, 2016

Laundry service income P 175 300

Less: Cost of laundry service
Direct labor-salaries of workers P 16 000
Laundry supplies 11 800
Utilities supplies 3 500 31 300
Gross Profit P 144 000
Less: Operating expense
Rent expense P 3 000
Taxes and license 5 000 8 000
Net income P 136 000
Thank you
Questions?