Professional Documents
Culture Documents
STATEMENTS
• INCOME STATEMENT
(Chapter 4)
Income Statement
• Single-step
• All operating revenues and gains are reported
first, followed by all operating expenses and
other losses.
• No separate section is prepared for COGS and
gross profit.
• Multiple-step
• Divided into separate sections, various
Gross Profit subtotals are reported.
Operating Income • Involves separate sections for gross profit,
Net Sales
Less: Cost of Goods Sold (COGS)
Cost to seller of products sold to customers.
• If purchased, then price plus freight-in.
• If manufactured, then DM, DL, Manf. Ovhd.
• The relationship between COGS and sales is an
important one.
= Gross Profit
• Key analytical tool in analyzing
firm’s operating performance.
• Gross profit percentage equals
Gross profit/Sales
Income Statement (continued)
Gross Profit
Less: Operating Expenses
Selling Expenses:
Advertising expenses
Salesmen’ salaries
General and Administrative Expenses:
Office and officer salaries Payroll taxes
Depreciation expense Repairs & maint.
Insurance expense Rent expense
Lease expense Bad debt expense
Research and Development Supplies
= Operating Income (or Operating Profit or Income from
Operations)
Measures overall performance of company’s
operations
Operating Income Percentage=Operating
Income/Sales
Income Statement (continued)
Operating Income
+/- Other Income/Expense
Interest income
Gain from sale of equipment FOR SALE
Gain from sale of investments
Interest expense
Loss from sale of equipment
Loss from sale of investments
Loss from write-down of inventory
Earnings before income taxes
Less: Income taxes
Net Earnings or Net Income
(or Income from Continuing Operations)
Income Statement (continued)