# Introduction to entrepreneurship/BMAN111/Statements/Income

The Income Statement (also called the profit and loss statement or profit and loss account) focuses on a company's revenue and expenses for a particular period of time (e.g. monthly, quarterly, or annually).

An income statement is based on the following equation (Profit = Income - Expenses).  Quiz

Try the following questions to check what you have understood.

• A company has annual Sales of $328,000 with Cost of Goods Sold$142,000. What is the company's Gross Profit?
• $470,000 • Try again. Don't forget, (Annual sales) - (Cost of Goods) = (Gross Profit). •$186,000
• Yes, that's right. (Annual sales) - (Cost of Goods) = (Gross Profit).
• The same company (over the same period of time) spends $76,000 on Salaries and$11,000 on Utilities. What is their income before tax?
• $99,000 • That's correct.(Gross Profit) - (Salaries) - (Utilities) = (Income before tax). •$87,000
• Try again. (Gross Profit) - (Salaries) - (Utilities) = (Income before tax).
• $65,000 • Try again. (Gross Profit) - (Salaries) - (Utilities) = (Income before tax). • If income tax is 20%, what is the same company's net income? •$79,200
• Well done! (Income before tax) - (Income before tax x 20%) = Net Income.
• $72,900 • Try again (Income before tax) - (Income before tax x 20%) = Net Income. • Your company has annual Sales of$447,000 and Cost of Goods Sold is $199,000. What is your Gross Profit? •$646,000
• Try again. Remember, (Annual sales) - (Cost of Goods) = (Gross Profit).
• $248,000 • Yes, that's correct. (Annual sales) - (Cost of Goods) = (Gross Profit). • For the same company (over the same period of time), Salaries are$104,000 and Utilities cost $18,000. What is your Income before tax? •$122,000
• Try again. (Gross Profit) - (Salaries) - (Utilities) = (Income before tax).
• $126,000 • That's right. (Gross Profit) - (Salaries) - (Utilities) = (Income before tax). •$370,000
• Try again. (Gross Profit) - (Salaries) - (Utilities) = (Income before tax).
• Now, if income tax is 20%, what is your Net Income
• $25,200 • Incorrect. This is how much Income Tax you have to pay i.e. (Income before tax x 20%). •$100,800
• Well done!. (Income before tax) - (Income before tax x 20%) = Net Income. Income statement activity
• Draw up an income statement based on the following figures to determine net profit:

 Sales 629,000 Cost of goods sold 293,000 Salary expense 127,000 Utilities expense 24,000 Income tax 20%

ItemIncomeExpenditure
Sales
Less Cost of Goods Sold
Gross Profit
Less Salary expense
Less Utilities expense
Income before tax
Less Income Tax Expense
Net Profit