Income Statement

1. Gross Sales

   Annotations:

   • Amount represents to amount of revenue generated by your business.
   1. Less: Sales Returns/Allowances

      Annotations:

      • Amount represents product returns and /or sales discounts.
      1. Net Sales

1. Purchases
   1. Delivery Charges
      1. Cost of Goods Sold

         Annotations:

         • Amount represents costs directly associated with making or acquiring your products. 

Annotations:

• Daily expenses incurred in the operation of your business. The order in which your expenses are listed in the Profit and Loss Statement varies among businesses. One method is to list them in order of size, beginning with the larger items. Miscellaneous expense is usually shown as the last item, regardless of size.

1. Expense #1
   1. Expense #2
      1. Expense #3
         1. Total Expenses

            Annotations:

            • Sum of all expenses incurred in operating your business.

Annotations:

• Gain or loss on the sale of assets and/or interest income.

1. Income #2
   1. Income #3
      1. Total Other Income

Annotations:

• The amount is basically the bottom line. If it is positive, you are in the “black” for the year. If it is negative, you are in the “red”. This is the profit or loss your business has made after all its income and all of its expenses have been taken into consideration.

1. Net Sales
   1. Less: Cost of Goods Sold
      1. Gross Sales Profit (Loss)

         Annotations:

         • Amount is determined by subtracting the cost of goods sold from net sales. It does not include any operating expense or income taxes.
         1. Less: Total Expenses
            1. Net Operating Income

               Annotations:

               • Represents the amount of income earned by your business before paying income taxes.
               1. Plus: Total Other Income
         2. Or Gross Margin