The income statement is used to measure the profit that the business has generated over a period. It is broken up into the following groups/sections:-
Gross Profit
This takes into account the direct costs and incomes to derive a basic profit in a business, by comparing the income (sales revenue) against the cost of sales (opening inventories, purchases and closing inventories).
Cost of sales = (Opening Inventories + Purchases) – Closing Inventories
Operating Profit
Operating profit takes gross profit and makes additional deductions to it to factor in the cost of indirect costs (i.e. salaries, rent, heating/lighting, communications, vehicles, depreciation).
Profit for the year (Net)
This is the figure that will be added to equity on the Balance Sheet, and is the operating profit less any interest payments made.
Income Statement Templates
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