Professor Eric Carstensen The Income Statement Professor Eric Carstensen MiraCosta College http://www.miracosta.edu/instruction/accounting/index.html

The Income Statement Also known as Profit & Loss (P&L), Statement of Financial Performance, Revenue Statement – it depends on management preference and that of the external users. We will explore different formats for both service and merchandising companies.

Income Statement for Service Business – Chart of Accounts Order for Expenses Revenues $ 12,400 Rent Expense 3,000 Wages Expense 4,000 Supplies Expense 600 Insurance Expense 400 Interest Expense 50 Deprec Expense - Equip 100 Total Expenses 8,150 Net Income $ 4,250

Income Statement for Service Business – Sorted by Expense Amount Revenues $ 12,400 Wages Expense 4,000 Rent Expense 3,000 Supplies Expense 600 Insurance Expense 400 Deprec Expense - Equip 100 Interest Expense 50 Total Expenses 8,150 Net Income $ 4,250

Income Statement for Service Business – Expenses Sorted Alphabetically Revenues $ 12,400 Deprec Expense - Equip 100 Insurance Expense 400 Interest Expense 50 Rent Expense 3,000 Supplies Expense 600 Wages Expense 4,000 Total Expenses 8,150 Net Income $ 4,250

Merchandising Income Statement Sales $ 25,600 less: Sales Discounts 1,200 less: Sales Returns & Allowances 800 Net Sales $ 24,400 Cost of Goods Sold 12,300 Gross Margin $ 12,100 Wages Expense 4,000 Rent Expense 3,000 Supplies Expense 600 Insurance Expense 400 Deprec Expense - Equip 200 Interest Expense 50 Total Expenses 8,250 Net Income $ 3,850

Single Step Income Statements Service Business Merchandising Business Revenues $ 12,400 Net Sales $ 24,400 Operating Expenses 8,150 Cost of Goods Sold 12,300 Net Income $ 4,250 Gross Margin $ 12,100 8,250 $ 3,850

Multi Step Income Statement Sales $ 385,900 less: Sales Discounts 5,200 less: Sales Returns & Allowances 2,800 Net Sales $ 380,700 Cost of Goods Sold 156,100 Gross Margin $ 224,600 Operating Expenses Selling Expenses Sales Salaries 54,200 Advertising Expense 20,300 Sales Supplies Expense 3,600 Deprec Expense - Sales Equip 2,700 Total Selling Expenses 80,800 General & Administrative Expenses Administrative Salaries 63,900 Office Supplies Expense 2,500 Insurance Expense 10,400 Deprec Expense - Equip 3,100 Total General & Admin Expenses 79,900 160,700 Operating Income Other Income & Expense Interest Income 7,800 Interest Expense 4,500 Gain on Disposal of Equipment 2,200 Total Other Income & Expense 5,500 Income Before Taxes 69,400 Incxome Taxes 23,800 Net Income $ 45,600  

Statement of Retained Earnings Beginning Balance $ - Net Income 4,250 Dividends (1,000) Increase (Decrease) 3,250 Ending Balance $ 3,250

Income Statement - Concluded In this presentation, we looked at different types and formats of the Income Statement and finally, where the last line on the statement – Net Income – goes next. There is a similar presentation on the Balance Sheet and one covering the Statement of Cash Flows.