An income statement is used in business.It shows the profitability of a company over time.The guide shows you how to make an income statement.Non-operational gains and losses are separated from operating income and expenses in a multi-step income statement.
Step 1: You can choose a time period for your statement.
Income statements measure revenues and expenses on a monthly, quarterly, or annual basis.Pick the duration that you want to use.Businesses that are publicly traded have to file income statements on a quarterly and annual basis.Income statements are generated by businesses to identify business trends and evaluate financial results.
Step 2: The income statement should be written.
The company’s name should be written at the top of the document.”Income Statement” can be written on the line directly beneath the company name.The period of time that the income statement covers is written on the next line.
Step 3: The income statement needs to be formatted.
Income statements have different sections.Gross profit is the total amount of money made from sales revenue and cost of goods sold in the first section of the income statement.The total operational expenses are calculated in the second section.Gains and losses unrelated to operational costs are calculated in the third section.Net income is the money you have made after subtracting your expenses from your revenue.
Step 4: The sales revenue is written below the income statement.
All revenue earned from the sale of goods and services is included in sales revenue.For the period you chose, list sales revenue.You could sell 10,000 units of inventory for $5 a piece.If your customers haven’t paid you yet, you would record sales revenue of $50,000USD.
Step 5: You can calculate the cost of goods sold.
The cost of goods sold is made up of direct labor, direct materials, and manufacturing overhead expenses.List the cost of goods sold.If you sold 10,000 units of inventory and paid an average of $2 for each unit, you would record $20,000 for the cost of goods sold.The cost of goods sold is the price you paid to purchase the inventory.
Step 6: To find your gross profit, subtract the cost of goods sold from the sales revenue.
The gross profit is the amount of money you made before expenses.The cost of goods sold should be written on the next line of your spreadsheet.If sales revenue is $50,000 and the cost of goods sold is $20,000, you would record gross profit of $30,000 on the income statement.To show that the number listed is a profit, use a green pen or change the color of the lettering.
Step 7: Write the operating expenses of the business.
Business administration expenses are called operating expenses.List the amount of expense incurred next to each line item.Common operating expenses include salary and wages for those employees not directly involved in the product of goods, rent, insurance, office supplies, professional fees, utilities, transportation expense, marketing, depreciation, and property taxes.Direct labor is deducted from the cost of goods.Group similar line items into one category to save space if the business has a lot of expenses.You can create an employee compensation line item that includes salaries, health insurance premiums, retirement benefits, payroll taxes, worker’s compensation, and payroll processing fees.
Step 8: You can find the depreciation and amortization for your business.
There are two methods that reduce the cost of assets.Depreciation can be calculated using a straight line method, which reduces the cost of a tangible asset over time.The calculation of depreciation is used for intangible assets.
Step 9: How much money have you spent?
Add all of the items to your expenses list with a calculator.On the next line of your spreadsheet, write your total expenses.The expenses should be subtracted at the end if you use a red pen or change the color of the lettering.
Step 10: Write the non-operational gains of the business.
Non-operational gains aren’t related to business operations, sales, or production.These revenues come from activities that are peripheral to normal operations.List the amount of revenue that was incurred during the period.Non-operational gains include interest revenues and gains from the sale of securities.Expenses reduce the income of the enterprise.
Step 11: To find the total, add the gains together.
If you add all the non-operational gains together, you have one number for total gains.If you put the total gains on the line underneath your list, you will be able to find it later.If you write your gains in green, you will know they are a profit.
Step 12: The business has non-operational losses.
Non-operational losses are not related to the business operation or sales.List the amount of expense incurred next to each line item.Non-operational losses include interest expense, losses from the sale of investments, and litigation.
Step 13: Find the total by combining your losses.
To get your total losses, combine everything listed in your losses section of your income statement.The total should be written on the next line of your statement.To color code your spreadsheet, list the total losses in red.Combine them with your other operational expenses.
Step 14: You can add the gross profit to the non-operational gains.
You can find the gross profit and the gains in the first section.You can find the total profit by adding the numbers together.
Step 15: Combine operational and non-operational losses to find the total expenses.
The total operating expenses and non-operational losses can be found in the second section of the income statement.To find the total amount of expenses for your business, add the 2 numbers together.
Step 16: You can find your net income by subtracting the losses from your gains.
Take the expenses and subtract them from the profits.The net income should be written at the bottom of the statement.Depending on how much you spent and earned, your net income could be positive or negative.