How Do You Write a Basic Income Statement?


Quick Answer

To write a basic income statement for a financial period, calculate expenses and costs of goods sold, and then subtract the sum from revenues. Showcase the obtained figure as the last entry in the statement. Write the entity's name, the title of the statement and the respective financial period on the top.

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Full Answer

  1. Calculate revenues

    Calculate the cost of goods sold by adding the opening stock and purchases. Then, from the sum, deduct the closing stock for the financial period. Subtract the cost of goods sold from the net sales to obtain the gross profit. This may also be called revenue in the statement.

  2. Calculate expenses

    Consider all expenses incurred to obtain the revenue in the financial period. Include provisions made for doubtful debts, depreciation and administrative expenses. Add losses and operational expenses in the final sum.

  3. Compose the statement

    In a vertical format, list the gross profit/revenue and the expenses separately, with subheadings of particulars. List every entry alphabetically, with its respective sum of money. The net profit should be the final entry in the statement. On the top, write the name of the financial entity, the title of the income statement and the financial period. Any notes and assumptions taken should be mentioned after the net profit has been calculated.

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