1. The Income Statement
A summary of a firm’s revenues and expenses during a specified accounting period
Profit (cash surplus)
Loss (cash deficit)
Revenues
The dollar amounts earned by a firm from selling goods, providing services, or performing business activities
Gross sales—the total dollar amount of all goods and services sold during the accounting period
Net sales—the actual dollar amounts received by a firm for the goods and services it has sold, after adjustment for returns, allowances, discounts
Copyright © Cengage Learning. All rights reserved

2. The Income Statement (cont’d)
Cost of goods sold
The dollar amount equal to beginning inventory plus net purchases less ending inventory
Cost of goods sold
Beginning inventory
Net purchases
Ending inventory = + –
Gross profit
A firm’s net sales less the cost of goods sold
Copyright © Cengage Learning. All rights reserved

3. The Income Statement (cont’d)
Operating expenses
All business costs other than the cost of goods sold
Selling expenses—costs related to marketing activities
General expenses—costs of managing the business
Net income
Revenues less expenses, when the difference is positive
Net loss
Revenues less expenses, when the difference is negative
Copyright © Cengage Learning. All rights reserved

4. Personal Income Statement
Copyright © Cengage Learning. All rights reserved

5. Business Income Statement
Copyright © Cengage Learning. All rights reserved