ACCOUNTING TUTORIALS
Part I Financial Statements and Basic Accounting Principles
Income Statement
The income statement answers the question: did the entity make a profit for the period?
The income statement reports gains and losses.
The income statement indicates results for a period of time (in contrast to the balance sheet, which shows a snapshot at a point in time.)
Sample income statement:
Explanation of terms:
Net sales: revenues from sales before any costs have been deducted
Cost of goods sold: cost of merchandise taken out of inventory for sale to customers
Gross profit: net sales – cost of goods sold
S, G, & A: selling, general, and administrative expenses. These are the operating expenses of the enterprise. Wages, advertising, and depreciation are included in S,G, & A.
Interest expense: cost of borrowed money
Income taxes: taxes on the firm’s income
Earnings per share: basic earnings per share of common stock outstanding = net income available for common stock / average number of shares of common stock that were outstanding during the year. (The above example assumes 100,000 shares outstanding.)
