Introduction to entrepreneurship/IENT103/Statements/Income

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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)[1].


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Required reading


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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?
  • 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?
  • If income tax is 20%, what is the same company's net income?
  • Your company has annual Sales of $447,000 and Cost of Goods Sold is $199,000. What is your 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?
  • Now, if income tax is 20%, what is your Net Income



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Income statement activity
  • Draw up an income statement based on the following figures to determine net profit:

    Sales629,000
    Cost of goods sold293,000
    Salary expense127,000
    Utilities expense24,000
    Income tax20%

    You can use this template to help you:
    ItemIncomeExpenditure
    Sales
    Less Cost of Goods Sold
    Gross Profit
    Less Salary expense
    Less Utilities expense
    Income before tax
    Less Income Tax Expense
    Net Profit


  1. Jump up BusinessDictionary