Income statement C Also called: profit loss statement= P&L statement= statement of earnings statement of operations A Technically subordinate to BS n Shows detail of changes to re Q Many investors consider IS more important than bs ◆ ariations in format Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity
11 Income Statement ⧫Also called: Profit & Loss statement = P&L statement = statement of earnings = statement of operations ⧫Technically subordinate to BS. Shows detail of changes to RE. ⧫Many investors consider IS more important than BS. ⧫Variations in format
Parts of income statement ◆ Heading: 1. Name of entity. 2. Name of statement 3. Time period covered Revenues ◆ Cost of sales Gross Margin. ◆ Expenses ◆ Net income Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 12
12 Parts of Income Statement ⧫ Heading: 1. Name of entity. 2. Name of statement 3. Time period covered. ⧫ Revenues. ⧫ Cost of Sales. ⧫ Gross Margin. ⧫ Expenses. ⧫ Net Income
Revenues in Income Statement Q Several separate revenue items or net Q Net sales= gross sales-sales returns and allowances- sales or cash discounts D Trade discounts not shown n Excludes sales or excise taxes collected for government. n Other revenues(from activities not associated with sales of entity's goods/services) may be included in-net sales or shown separately. Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 13
13 Revenues in Income Statement ⧫ Several separate revenue items or net. ⧫ Net sales = gross sales - sales returns and allowances - sales or cash discounts. Trade discounts not shown. Excludes sales or excise taxes collected for government. Other revenues (from activities not associated with sales of entity’s goods/services) may be included in net sales or shown separately
Expenses on Income Statement Q Cost of Sales(or cost of goods sold). n Associated with a decrease in the asset inventory 9 Gross margin= gross profit= Sales-COGS. n May or may not be shown. Q Separate disclosure of: n Research development expenses. n Interest expense. Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 14
14 Expenses on Income Statement ⧫ Cost of Sales (or cost of goods sold). Associated with a decrease in the asset inventory. ⧫ Gross margin = gross profit = Sales - COGS. May or may not be shown. ⧫ Separate disclosure of: Research & development expenses. Interest expense
Income statement format Q Operating income may be shown before Other income and expense Net income= Income before taxes=Income tax expense Q Income before taxes=Operating income adjusted for other revenues and expenses Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 15
15 Income Statement Format ⧫Operating income may be shown before Other income and expense. ⧫Net income = Income before taxes – Income tax expense. ⧫Income before taxes = Operating income adjusted for other revenues and expenses