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Monday, 14 July 2014

Income Statement


Income Statement is used to show business done by a company in one year.

One formula can conclude the whole income statement.

Revenue - Expense = Profit

For example, you own an company which selling apple. After one year,  1000 apples are sold with 2 dollar each.(Revenue= 1000 x2=2000) Suppliers provide apples with 1 dollar each. Salary for worker is 100 dollar per year and electricity cost per year is 50 dollar. (Expense= 1000 x1+100+50=1150) Your company earns a profit of 850 dollar. (Profit = 2000-1150 =850) 


Income Statement Template 



Components of Income Statement:
  1) REVENUE : Price x Quantity
  2) COST OF GOOD SOLD : Direct costs involved in producing  products. Examples are materials, direct labour, factory overhead such as electricity bill and depreciation of machines.
  3) GROSS PROFIT : REVENUE - COST OF GOOD SOLD
  4) OTHER OPERATING PROFIT : Other incomes from direct sales of products such as sales of electricity and rental fees from unused spaces from building used for operation.
  5) OPERATING EXPENSE :  Indirect expense incurred other than direct cost such as general & administrative expenses, sales & distribution expenses, promotion expenses, research expenses.
  6) OPERATING PROFIT :  GROSS PROFIT + OTHER OPERATING   PROFIT - OPERATING EXPENSE
  7) FINANCIAL PROFIT (also called Non-Operating Profit) : Profit that are generated from non-operating activities. Examples are interest received, gain from selling securities.
  8) FINANCIAL EXPENSE (also called Non-Operating Expense) : Expense that are not included in operating activities. Examples are interest paid, lost from selling securities.
  9) PROFIT BEFORE TAX (PBT) : OPERATING PROFIT + FINANCIAL PROFIT - FINANCIAL EXPENSE
  10) INCOME TAX : Tax paid to government based on profit before tax (or more accurate taxable income)
  11) NET PROFIT FROM CONTINUING ACTIVITIES : PROFIT BEFORE TAX - INCOME TAX
  12) NET PROFIT FROM DISCONTINUED ACTIVITIES : Gain/ Loss from liquidating one of the sectors of the company
  13) OTHER COMPREHENSIVE INCOMES : Mainly consist of three factors that not added into the profit. Examples are Gain/ Loss from foreign currency, gain/loss from hedging, unrealised gain of available-for-sales securities.
  14) TOTAL COMPREHENSIVE INCOMES : NET PROFIT + OTHER COMPREHENSIVE INCOMES


4 comments:

  1. Very nicely created this income statement! Using the right type of formula is the key to prepare such statement nicely. If you've struggled to figure out whats driving your expenses, take a look at this analytics software (finance summary module from PanXpan). It helps you research and share your business's expenses and revenue with your team.

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  2. Many Thanks for Your Blog Post. Good Resource for All.

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    Final Expense Leads

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