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