income statement
Post on 14-Nov-2014
1.543 Views
Preview:
DESCRIPTION
TRANSCRIPT
Income Statement
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
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
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
Gross ProfitGross 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
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
Improving Gross ProfitImproving Gross Profit
Increase selling price of stock Improve/modify marketing techniques Reduce cost of goods sold:
- investigate alternative suppliers
- take advantage of discounts
Increase selling price of stock Improve/modify marketing techniques Reduce cost of goods sold:
- investigate alternative suppliers
- take advantage of discounts
Net ProfitNet 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
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
J ThomasIncome Statement
for year ended 30 June 2004
J ThomasIncome Statement
for year ended 30 June 2004
Sales 10 000Less Sales Returns 500 9 500Less Cost of Goods Sold 2 100GROSS PROFIT 7 400
Add Other RevenueCommission revenue 100Rent revenue 100 680
6 720
Less Other ExpensesSales wages 1 000Insurance 3 200Discount Expense 1 500 5 700Net Profit $1 020
Sales 10 000Less Sales Returns 500 9 500Less Cost of Goods Sold 2 100GROSS PROFIT 7 400
Add Other RevenueCommission revenue 100Rent revenue 100 680
6 720
Less Other ExpensesSales wages 1 000Insurance 3 200Discount Expense 1 500 5 700Net Profit $1 020
top related