Q:

How do you prepare an income statement?

A:

Quick Answer

To prepare an income statement, first gather together sales and cost of goods sold data to determine business profits, and then gather the operating expenses. Once this information is presented in a table, subtract the total operating expenses from the profit to present the net income for the company.

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Full Answer

  1. Create the revenue section

    Add together the net sales for the covered income statement period and place this on line one of the income statement. The listing should include the name of the listing "Net Sales," with the dollar amount in sales to the right on the same line. On line two, place the cost of those goods sold. Subtract the cost of goods sold from the net sales number and place on line three as the gross profit for the company.

  2. Create the operating expenses section

    List the operating expenses for the statement period line by line. Operating expenses includes any cost related to the production or sales of the goods produced, such as office expenses, rent, salaries, telephone expenses and supplies. Add the expenses together and list them as the total operating expenses.

  3. Calculate net income

    Subtract the total operating expenses from the gross profit and show the total on the final line of the income statement as the net income for the income statement period.

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