Unit 13 - Income statement


Notes and activities on Income statement

Answer Activities and Questions


An income statement is prepared to show the Gross Profit/ Loss and Net Profit/ Loss of the business. There are 2 sections in an income statement:

  • Trading Section – Prepared to show Gross profit or Gross loss of a business.
  • Cost of sales = Opening inventory + Net purchases – closing inventory
  • Gross profit = Sales – Cost of Sales
  • Profit and Loss Section – Prepared to show Net Profit or net loss of a business
  • Net Profit = Gross profit – Expenses

Items used to prepare Trading section

Sales (Revenue)

Opening inventory

Closing inventory

Purchases

Items used to prepare Profit and Loss section

Examples of Expenses

Wages and salaries

Insurance

Communication expenses

Rent and rates

Advertising

Selling expenses

Power, light and heat / electricity

Warehouse wages

Marketing expenses

Discount allowed

Commission on sales

Commission paid

Administrative expenses

Office expenses

Interest received

Distribution cost

Postage and Stationery

Motor van running expenses

Carriage outwards (on sales)

Motor van expenses

General /sundry expenses


Income statement for the year ended 31st December 2016


$

$

Sales / Revenue


****

Less cost of sales:



Opening inventory

****


Add Purchases

***


Less Closing inventory

(****)


Cost of sales


(****)

Gross Profit


****

Less expenses:



Wages and salaries

***


Rent and rates / insurance / advertising

***


General / administrative / sundry expenses

***


Total expenses


(***)

Profit for the year


****


Q1 – Prepare an Income statement for the year ended 31st December 2000


$

Sales (Revenue)

139 500

Purchases

69 000

Wages and salaries

3 250

Rent and rates

3 150

Advertising

1 550

Inventory - 1st Jan

15 250

Inventory - 31st Dec

14 450

Stationery

950

Motor van expenses

550

Electricity

250

Insurance

750

 

Q2 – Prepare an Income statement for the year ended 31st December 2001


$

Sales (Revenue)

148 000

Purchases

99000

Interest paid

1200

Warehouse wages

4200

Rent and rates

3300

Insurance

1600

Inventory - 1st Jan

11 200

Inventory - 31st Dec

13 450

Sundry expenses

150

Distribution cost

130

Administrative expenses

170

 

Q3 – Prepare an Income statement for the year ended 31st December 2002


$

Inventory - 1st Jan

3 750

Inventory - 31st Dec

4 500

Wages and salaries

1 800

Sales (Revenue)

49 000

Purchases

12 000

Rent and rates

240

Advertising

360

Office expenses

120

General expenses

180

 

Q4 – Prepare an Income statement for the year ended 31st December 2003


$

Inventory - 1st Jan

1 990

Inventory - 31st Dec

2 110

Commission Paid

3 255

Interest on loan

125

Sales (Revenue)

32 300

Purchases

13 400

Light and Heat

990

Marketing expenses

110

Communication expenses

140

Selling expenses

250