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Income Statement Part 1 Notes

Accounting Notes > Accounting (Special Edition) Notes

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Income Statement Part-1

Definition The income statement is a financial statement of an organization which measures the financial performance of the business for a specified accounting period e.g. one year (Jan-Dec). In other words An income statement shows the components of profit or loss, It begins with revenues and ends with profit/ loss for the period after tax. It is also known as statement of earnings or profit & loss (P&L). Why is it important?
The income statement is a very important documents for the users. The Income statement shows the revenues and expenses of a company for the year. Users of F/S can find a plenty of important information on the income statement including the entity's sales, productivity, gross profit and net profits. Investors can analyse and predict key information about the business. Lecture Notes Presentation of Income statement The suggested (multi step) format is as follows. Income statement for XYZ for the year ended 31 December 20X1

Revenue Cost of sales Gross profit Other operating income Distribution costs Administrative expenses Profit from operations Finance cost Profit before tax Income tax expense Net profit for the period

X (X) ___ X X (X) (X) ___ X (X) ___ X (X) ___ X ___

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