INCOME STATEMENT

WHAT IS INCOME STATEMENT?

The income statement (statement of operations, or P&L for profit and loss statement) reports a company’s net income for a specified period of time. Net income is revenues and gains minus expenses and losses. Some terms associated with the income statement include: revenues amounts earned, sales, service fees, interest earned. expenses costs incurred to earn revenues, costs used up or expiring during the accounting period, and costs for which the future value cannot be measured. gain sale of a long-term asset for more than its carrying (book) value; elimination of an obligation for less than its carrying value. loss sale of a long-term asset for less than its carrying (book) value; elimination of an obligation for more than its carrying value. gross profit sales minus cost of goods sold. cost of goods sold beginning finished goods inventory + net purchases (or cost of goods manufactured) – ending finished goods inventory.

single-step income statement one subtraction to reach net income: operating and nonoperating revenues minus operating (including cost of goods sold) and nonoperating expenses.

multiple-step income statement at least one subtotal before reaching net income: sales – cost of goods sold = gross profit; gross profit – operating expenses = income from operations. Income from operations +/- nonoperating items = net income. selling, general and administrative SG&A; operating expenses; noninventoriable costs. operating income income from operations; pretax income before nonoperating revenues and expenses. nonoperating income income from peripheral activities.