Learn more about the income statement of the companies, which includes the income and expenses of the companies in a certain time period, in more detail from our article.

 

Table of Contents

 

How is the Income Statement Prepared?

What is in the Income Statement?

Structure of Income Statement

What Purpose Can Income Statement Be Used For?

Final Thoughts

 

Income and expenses, which are of great importance for businesses in accounting processes, must be followed in a table. This follow-up process will provide great convenience to see the status of the company and to prepare various strategies for the future. The income statement is calculated by calculating all the income, expenses and costs of the enterprises in certain periods; It is a table showing the profits of the company. Income statements are of two types: account type income statement and report type income statement. Account type income statement is arranged in the form of at. On the left are the expenses and on the right are the revenues. In the report type income statement, incomes and expenses are listed as reports.

 

How is the Income Statement Prepared?

 

While preparing the income statement, it is necessary to pay attention to the following:

The income statement is prepared in the form of forms in accordance with the principles of the financial statements. If businesses want to save time while making comparisons, they should definitely prepare income statements and create them in unity.

Income and expenses are shown in the table as continuous and non-continuous. In addition, in the table; ordinary income and profits, ordinary losses and expenses, extraordinary profits and incomes, extraordinary losses and expenses are presented separately. Financial expenses are in a separate place in the table. Items with no amount in the table are not included.

Ordinary operating expenses and extraordinary expenses are recorded separately.

The revenues of the business during the year are written in the receivables section of the income accounts starting with 6, and the expenses are written in the expense accounts section starting with 7.

While preparing the income statement, inventory transactions are made at the end of the period and the records of the sold goods are entered. Afterwards, the expense accounts are transferred to the relevant expense accounts in the income statement starting with 6 using reflection accounts, and the account is closed.

All income and expense accounts starting with 6 are transferred to the profit and loss account for the period. Then the account is closed.

 

What is in the Income Statement?

 

● Gross sales

● Sales discounts

● Net sales

● Costs

● Operating expenses

● Operating profit or loss

● Ordinary income from other activities

● Ordinary expenses from other activities

● Financial expenses

● Ordinary profit or loss

● Extraordinary incomes

● Extraordinary expenses

● Period profit or loss

● Tax

● Net profit or loss for the period

 

Structure of Income Statement

 

The income statement finds a company's net income, defined as total revenue minus total expenses. Thus, structurally, we start with the gross income from the income brought by the business and work to generate net income from there. Depending on how many different sources of income or expense the business has, this can include many different figures.

 

With this in mind, an income statement will begin with the total revenue generated by the business and then subtract the cost of goods sold (COGS) if applicable to the business. This equation gives us the gross profit of the company.

 

What Purpose Can Income Statement Be Used For?

 

The income statement can be used to see how healthy a business's finances are -- and details of why the business is improving financially, using a multi-stage income statement.

 

With details on how much money is spent on various operating expenses, business owners can have a clearer picture of the company's strengths and shortcomings and develop a better understanding of how the company must be managed to be successful. Potential business owners and entrepreneurs can also look at the income statements of other businesses to see what mistakes they should avoid when setting up their businesses.

 

Final Thoughts

 

Income statements can also be useful to investors. In addition to showing the details of how the company's net income was calculated, an income statement is also likely to have the same data for the fiscal year or quarter prior to comparison. With this information, you can better analyze whether a company is getting stronger financially or if its expenses are causing further declines. While it's not the beginning and the end, it's a useful tool if you're interested in seeing if this particular company will be a worthwhile investment for you in the near future.

 

We hope that this blog post will be beneficial for you. We will continue to create useful works in order to get inspired by everyone. We are sure that we will achieve splendid things altogether. Keep on following Finage for the best and more.  

 

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