Contents of an income statement
An example of an income statement is shown below:
| £ | £ | |
| Sales | 100, 000 | |
| Less cost of sales | ||
| Opening stock | 10, 000 | |
| Add purchases | 40, 000 | |
| Subtotal | 50, 000 | |
| Less closing stock | 10, 000 | 40, 000 |
| Gross profit | 60, 000 | |
| Less expenses | ||
| Rent | 5, 000 | |
| Electricity | 5, 000 | |
| Wages | 15, 000 | |
| 25, 000 | ||
| Profit for the year | 35, 000 |
| Sales | |
| £ | |
| £ | 100, 000 |
| Less cost of sales | |
| £ | |
| £ |
| Opening stock | |
| £ | 10, 000 |
| £ |
| Add purchases | |
| £ | 40, 000 |
| £ |
| Subtotal | |
| £ | 50, 000 |
| £ |
| Less closing stock | |
| £ | 10, 000 |
| £ | 40, 000 |
| Gross profit | |
| £ | |
| £ | 60, 000 |
| £ | |
|---|---|
| £ |
| Less expenses | |
| £ | |
| £ |
| Rent | |
| £ | 5, 000 |
| £ |
| Electricity | |
| £ | 5, 000 |
| £ |
| Wages | |
| £ | 15, 000 |
| £ |
| £ | |
|---|---|
| £ | 25, 000 |
| £ | |
|---|---|
| £ |
| Profit for the year | |
| £ | |
| £ | 35, 000 |
The main contents of the income statement are:
- Sales - This is the total value of the goods sold to customers. In the table above this is £100, 000.
- Cost of sales - This is the direct cost of the goods that have been sold for example the raw materials used to make the product. It is calculated by adding the opening stockThe amount of goods that are in stock at the beginning of a set time period to purchasesGoods that have been bought over a set period of time then subtracting the closing stockThe amount of goods that are in stock at the end of a set time period. It is calculated by adding the opening stock to purchases then subtracting the closing stock. In the table above this is £40, 000.
- gross profitThe difference between sales revenue and the cost of making the product sold. - This is the difference between the sales and the cost of sales. In the table above this is £60, 000.
- Expenses– This is all the indirect costs incurredTo come into a cost or liability, usually a charge for a product or service received by a company by the business such as rent, wages and electricity. In the table above this is £25, 000.
- net profitThis profit is calculated by deducting all expenses away from gross profit. – The actual profit made by the business after all expenses have been deducted. In the table above this is £35, 000.
