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Lesson 1: Introduction to Financial Statements

The Income Statement | Video

Read Chapter 1, pp. 9–top of 11 and Chapter 3, pp. 112–114.

The income statement reports the operating results of the company for one period, such as a year, quarter, or month. A simple single-step income statement contains just two major elements:

  • Revenues: amounts earned from selling goods or services during the period.
  • Expenses: amounts incurred to generate revenues during the period.

A multiple-step income statement has multiple subtotals, like gross margin, operating income, and income before taxes. The excess of revenues over expenses is the company's net income. Net income is a measure of profit (or loss) for the period, so the income statement is sometimes referred to as a profit and loss (P&L) statement.

Table 1.3. Robyn's Retail Income Statement
Robyn's Retail
Income Statement
For the month ended September 30, 20xx
 
Sales revenue                                     $       8,000
Cost of Goods Sold              5,000
Gross Margin     3,000
Advertising expense   250  
Utilities expense   450  
Rent expense   800  
Insurance expense   50  
Depreciation expense   108  
Total Operating expenses            1,658
Operating Income     1,342
Interest expense                  50
Net Income     $       1,292

Please watch to learn more about income statements.

Note: Video removed. You will have access to the video in the actual course.

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